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As global authorities continue to wrestle with how to regulate cryptocurrencies, the U.K. Law Commission on Thursday proposed changes to clarify how property laws apply to digital assets in England and Wales.
The 57-year-old commission says digital assets like crypto tokens and non-fungible tokens—unique blockchain tokens that signify ownership that are better known as NFTs—play an increasingly important role in modern society.
"Digital assets such as NFTs and other crypto-tokens have evolved and proliferated at great speed, so it's vital that our laws are adaptable enough to be able to accommodate them," said Professor Sarah Green, the Law Commissioner for Commercial and Common Law, in a statement.
According to a post from the Law Commission, the U.K. government tasked the body with reviewing the law to ensure that it can accommodate digital assets as they continue to evolve and expand as stores of value, forms of payments, or equity or debt securities.
To strengthen this approach, the agency suggests recognizing a new category of personal property called “data objects.”
"We provisionally conclude that crypto-tokens satisfy our proposed criteria of data objects and are appropriate objects of property rights," the commission wrote.
Among the implications of this classification is the possibility of setting awards or fines in cryptocurrencies.
"We provisionally conclude that there is an arguable case for law reform to provide courts with the discretion to award a remedy (where traditionally denominated in money) denominated in certain crypto-tokens in appropriate cases."
The commission says the new proposal aims to deliver wider recognition and legal protections for digital assets, allowing a more diverse range of people and companies to interact online and benefit from them.
"While the law of England and Wales has gone some way to accommodate the rise of new technologies, the commission argues that there are several key areas that require law reform, to recognize and protect the rights of users and maximize the potential of digital assets," it wrote.
The commission is now looking for input from technologists and users to help examine how existing personal property laws apply to crypto, saying the non-tangible nature of digital assets is why many do not fit easily into current private property law definitions.
The new proposal explicitly recognizes “data objects” as a category of personal property under the law, options for how the government could develop this specific property, the law around ownership and control, and the law around transfers and transactions involving digital assets.
"It's important that we focus on developing the right legal foundations to support these emerging technologies, rather than rushing to impose structures that could stifle their development," Green continued. "By clarifying the law, England and Wales could reap the potential rewards and position itself as a global hub for digital assets."
In an unrelated case, a U.K. judge ruled individuals and entities can now be served legal documents via NFTs, showcasing a move to adopt blockchain technology.