Britain should create a new category of private property law for digital assets like cryptocurrencies which are being used to make payments or represent other assets, independent body the Law Commission proposed on Thursday.
Authorities around the world are taking steps to regulate the crypto asset sector, which has grown rapidly and been labelled a “Wild West” by European Union lawmakers.
Cryptocurrencies, such as bitcoin, surged in price in 2020 and 2021, but have fallen sharply this year. NFTs – blockchain-based assets which represent a digital files such as images, have also proliferated rapidly.
Rishi Sunak said in April when he was finance minister he wanted to make Britain a global hub for crypto asset technology. He asked the Law Commission to review whether current laws can accommodate digital assets.
The Commission said on Thursday many digital assets, such as non-fungible tokens or NFTs, do not fit easily into current private property law.
“Our proposals aim to create a strong legal framework that offers greater consistency and protection for users and promotes an environment that is able to encourage further technological innovation,” said Sarah Green, the Law Commissioner for commercial and common law.
The Commission proposed adding a third “data objects” category to the existing “things in possession”, or tangible assets like gold, and “things in action”, such as debt or shares in a company, categories of personal property.
To come under the new category, a digital asset must be composed of electronic data and meet other criteria, such as only being used by one person at a time, the Commission proposed in a paper put out to public consultation.
Last week Britain set out a draft law giving its regulators powers over the use of stablecoins in payments, with a further consultation on regulating other types of crypto assets due later this year.
The crypto market has fallen sharply in the past few months, with $1 trillion wiped off the global cryptocurrency market cap since early April, based on CoinGecko data, as the prospect of Federal Reserve rate increases to combat high inflation has prompted investors to ditch riskier assets.