There were several interesting developments across the world this week in the digital asset arena. First, the UK Jurisdiction Taskforce (UKJT) published its Legal Statement on the Status of Cryptocurrencies and Smart Contracts. The UKJT hopes this statement will give the market "legal certainty and predictability" in this emerging space. In sum, the UKJT has determined that digital assets are "property" under UK law. It reasoned that such assets have the indicia of property, and simply because they have distinctive or innovative features does not disqualify them from being property. While digital assets cannot be physically possessed, therefore meaning they cannot be used as bailment, they can be used to grant security through other means.
As to smart contracts, the UKJT found they are capable of being a contract in the broader sense. This is because in a smart contract, the parties to it have intended to create a legal relationship and have each given something of value as consideration. Therefore, "a smart contract can be identified, interpreted, and enforced using ordinary and well-established legal principles."
The Monetary Authority of Singapore (MAS) issued a consultation paper that proposes allowing payment token derivatives to be traded on approved exchanges and to regulate their activity. MAS states there is significant interest in payment tokens such as bitcoin and ether, and the interested institutional investors need a regulated product to be able to hedge their exposure to them. It warned, however, that such tokens are not suitable for most retail investors, who should use "extreme caution" when trading in them or their related derivatives.
Back in the United States, CFTC Chair Heath Tarbert penned an op-ed piece in which he advocated for principles-based regulation in the fintech space. Tarbert stated that the regulators should avoid "detailed prescriptive rules" and focus on "high-level, broadly stated principles" for the industry. The piece points out that the U.S. code covering banking, securities and derivatives regulation totals more than 13,000 pages, which he finds to be inefficient and inflexible. While he acknowledged certain rules must be in place, especially those covering customer protection, he indicated that because of the rapidly evolving nature of the space, a principles-based system is more appropriate.
For more information, please refer to the following links:
- UK: Legal statement on cryptoassets and smart contracts
- UK: The Launch of the Legal Statement on the Status of Cryptoassets and Smart Contracts
- Cryptoassets Get Boost As Judges Settle Key Legal Question
- CFTC: ICYMI: Fintech Regulation Needs More Principles, Not More Rules
- Singapore: MAS Consults on Proposed Changes to Regulate Payment Token Derivatives traded on Approved Exchanges
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