Key Takeaways
- As part of its recommendations, the Commission called for crypto assets to be recognized as a new category of property.
- The Commission noted that current options for using crypto as collateral were deemed inadequate, prompting the call for a bespoke statutory legal framework that would provide clearer guidelines.
In a report released on Wednesday, the Law Commission of England and Wales, funded by the Ministry of Justice, has recommended the creation of a specialized framework for using cryptocurrency as collateral. The report, which follows the first-ever government-commissioned analysis on accommodating digital assets in the UK, highlights the need for a regulatory regime that goes beyond the existing collateral arrangements for traditional finance.
The Law Commission emphasized that the unique characteristics of digital assets necessitate tailored treatment under the law. As part of its recommendations, the Commission called for crypto assets to be recognized as a new category of property.
“As such, we recommend that, as a matter of priority, the Government sets up a multi-disciplinary project to formulate and put in place a bespoke statutory legal framework that better and more clearly facilitates the entering into, operation and enforcement” of certain crypto collateral arrangements,” the Commission said
To support the implementation of the proposed framework, the Commission suggested the establishment of a panel comprising industry-specific technical experts, legal practitioners, academics, and judges. This panel would advise courts on complex legal issues relating to digital assets, helping to ensure consistency and expertise in legal decision-making.
While acknowledging that the legal systems of England and Wales are well-suited to accommodating crypto within existing frameworks, the Commission stressed the need for specialized treatment in certain areas. The current options for using crypto as collateral were deemed inadequate, prompting the call for a bespoke statutory legal framework that would provide clearer guidelines and facilitate the entering into, operation, and enforcement of crypto collateral arrangements.
UK’s crypto-friendly regulatory regime has recently grabbed the attention of crypto executives who have become increasingly disillusioned with the immense regulatory scrutiny faced in the US. Earlier this year, the CEO of Coinbase expressed his admiration for the regulatory regime in the UK and hinted at the possibility of the company considering a move to Britain if frustrations with US regulators persisted.
Currently, Lawmakers in the upper house of the UK Parliament are moving forward with the Financial Markets legislation that could help further the adoption of crypto in the country.
