Cryptocurrency, a virtual or digital currency based on blockchain technology, has gained popularity since its creation in 2009. Examples include Bitcoin, Ethereum, XRP, and Tether.
Unlike conventional banking, cryptocurrency is purely digital and decentralized. Transactions occur independently of government-related entities, making it less susceptible to government interference or manipulation.
The Law Commission for England and Wales has recently published a consultation on draft legislation that aims to assign property rights to cryptocurrencies. This move comes after the Commission’s exploration into the nature of digital assets, particularly crypto tokens and non-fungible tokens (NFTs), which have demonstrated the capacity to possess property rights.
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The Law Commission is an independent statutory body responsible for reviewing and recommending changes to laws in England and Wales. In its report on digital assets last year, the Commission highlighted that crypto tokens and NFTs could attract property rights. However, due to their unique characteristics, digital assets do not neatly fit within traditional categories of personal property.
The draft legislation seeks to label crypto as property, granting it similar legal status as physical assets. The Law Commission recognizes that personal property rights are crucial for various reasons, including situations involving insolvency or unlawful interference with assets. By assigning property rights to crypto, the proposed legislation aims to provide legal clarity and protection for crypto holders.
The question of whether cryptocurrency constitutes “property” is significant because it affects legal actions that can be taken if cryptocurrency is misappropriated. Recent developments have shed light on this issue:
UK Jurisdiction Taskforce’s Legal Statement (2019): The UK Jurisdiction Taskforce recognized that crypto assets are not outside the law, despite practical obstacles to legal intervention due to their inherent nature. This statement emphasized that crypto assets are still subject to legal principles.
In the case of Robertson v Persons Unknown, the Court held that Bitcoin should be treated as “property” for an asset preservation order. This decision assisted a victim of fraud against a phishing attack where approximately US $1.2 million was transferred to the fraudster.
Similarly, in AA v Persons Unknown, the Court ruled that “crypto assets such as Bitcoin are property” for the purpose of an interim proprietary injunction. The question of whether cryptocurrency constitutes “property” is significant because it affects legal actions that can be taken if cryptocurrency is misappropriated. Recent developments have shed light on this issue.
The UK Jurisdiction Taskforce recognized that crypto assets are not outside the law, despite practical obstacles to legal intervention due to their inherent nature. This statement emphasized that crypto assets are still subject to legal principles.
In the case of Robertson v Persons Unknown, the Court held that Bitcoin should be treated as “property” for an asset preservation order. This decision assisted a victim of fraud against a phishing attack where approximately US $1.2 million was transferred to the fraudster.
Similarly, in AA v Persons Unknown, the Court ruled that “crypto assets such as Bitcoin are property” for the purpose of an interim proprietary injunction.
The Law Commission is actively seeking views from stakeholders, industry experts, and the public regarding this draft legislation. Responses received during this consultation period will significantly influence the final shape of the legislation that will be proposed to the government. The deadline for submitting responses is March 22, 2024.
In addition to its work on crypto legislation, the Law Commission has also called for evidence related to its project on digital assets and electronic trade documents in private international law. This broader initiative aims to address legal challenges arising from cross-border transactions involving digital assets.