The Law Commission says that digital assets are generally treated as property by market participants. While the law of England and Wales is flexible enough to accommodate digital assets, certain aspects of the law need reform to ensure that digital assets are given consistent recognition and protection. For example, the law recognises that a digital asset can be property and that a digital asset can be "owned". However, it does not recognise the possibility that a digital asset can be "possessed" because the concept of "possession" is currently limited to physical things. This has consequences for how digital assets are transferred, secured and protected under the law.
The Law Commission has been asked by the Government to make recommendations for reform to ensure that the law is capable of accommodating both cryptoassets and other digital assets in a way which allows the possibilities of this technology to flourish. The work will consider whether digital assets should be "possessable". This could have significant consequences for the functioning and development of the market in digital assets.
The work is linked to the Law Commission's current proposals for the digitalisation of trade documents, such as bills of lading and bills of exchange, which also require to be "possessed" in the eyes of the law (click here for more information). The digital assets project will build on the Law Commission's conclusions on the concept of possession in its digitalisation of trade documents project. It will also build on the conclusions of the recent "Legal Statement on the Status of Cryptoassets and Smart Contracts" by the UK Jurisdiction Taskforce of the LawTech Delivery Panel (the UKJT) (see item above).
The Law Commission's call for evidence on the digital assets project seeks views about, and evidence of, the ways in which digital assets are being used, treated and dealt with by market participants. It also seeks views on the potential consequences of digital assets being "possessable".
The purpose of the call for evidence is to give stakeholders and market participants an opportunity to provide their input ahead of the publication of a consultation paper on digital assets, which will make proposals for law reform. The call for evidence does not contain any proposals for law reform.
The call for evidence closes on 30 July 2021. To access the call for evidence and for information on how to respond, click here.
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