The UK Law Commission has emphasized the importance of developing legislation concerning crypto assets, positioning the country as a global center for cryptocurrencies and non-fungible tokens (NFTs).
In their recent recommendation, the independent panel highlighted the need to establish a comprehensive legal framework for digital assets, which would foster the growth of these new technologies and enable diverse market participants to engage with and benefit from them.
The report has been submitted to the UK government for their consideration and final decision on adopting the recommendations.
Prominent figures such as Judge Geoffrey Vos have suggested that updates to the legal system in England and Wales could make the UK an appealing destination for the crypto industry, further bolstering its attractiveness.
Clarity And Legal Framework For Digital Assets
The UK Law Commission has released a report urging the government to provide clear guidance regarding the treatment of digital assets.
Specifically, they seek clarification on whether these assets should be considered as currency and if they can be utilized as collateral within the existing regulatory framework.
In an effort to address the global need for regulatory clarity, various regulators are striving to establish guidelines for the treatment of crypto assets. Just recently, Federal Reserve chair Jerome Powell announced the recognition of stablecoins as a form of currency.
Additionally, the UK Law Commission emphasized the necessity for market participants to possess legal tools that enable them to utilize “new ways to take security over crypto-tokens and tokenized securities.”
To address these concerns, the panel proposed implementing legislation that officially designates digital assets as a distinct category of personal property.
Furthermore, they suggested the formation of a new panel consisting of industry specialists to advise Prime Minister Rishi Sunak’s government on the technical and legal framework for digital assets.
UK Law Commission: Concerns Over Regulatory Approach
It is worth noting that, in a separate development last month, a UK panel drew parallels between crypto trading and gambling activities.
The UK Law Commission’s report highlights the potential implications of regulating crypto trading akin to gambling, deviating from the approach taken by other jurisdictions.
In this regard, the report expresses its concerns by stating:
We have reservations about regulating retail trading and investment involving unbacked crypto assets as a financial service. Such regulation may create a ‘halo’ effect, misleading consumers into perceiving this activity as safer or protected when it may not be the case.
The recent comparison drawn by the UK panel between Bitcoin investing and sports betting signifies their perspective on digital assets, emphasizing factors such as the absence of intrinsic value, significant price volatility, and a perceived lack of discernible societal benefits. These characteristics differentiate digital assets from traditional financial assets, according to the panel’s viewpoint.
In April last year, the UK Treasury expressed its ambition to become a leading global hub for cryptocurrencies and took steps to regulate crypto-related businesses and promote investment in the country through legislative proposals.