Law Commission Proposes Revolutionary Rules for Ownership of Crypto Tokens and NFTs – TechCrunch
Law reform body for England and Wales says digital assets are personal property
It’s a major earthquakes occurring in the sphere of digital assets, which are expected to create shock waves that will affect technology not only in the real world, but also in the metaverse.
These potentially revolutionary changes appear in an innocuous, if lengthy, consultation paper entitled “Digital Assets: Consultation paper”, published by The Law Commission of England and Wales, the UK law reform public body
What this document proposes is that digital assets are recognized as a new form of personal property, potentially creating an “internet of property”, which could have huge implications for the UK’s position as a hub for distributed ledger technology (DLT) and fintech.
Why is property rights important?
Property rights are indispensable for the establishment and deployment of capital. A proper legal basis for the ownership of digital assets will have a number of real-life consequences, such as allowing the creation of security over digital assets – meaning they can be used as collateral for loans – and giving individuals or businesses greater protection in case of fraud and enable digital assets to be distributed as other property in the event of insolvency.
The Law Commission’s consultation note has considered the many conflicting views and decided on one option: to treat digital assets as a new form of property.
For example, if someone takes your NFT, you may want to start legal action to get it back, try to prevent the recipient from transferring it to another account, report them to the police for theft or take action against someone which has helped them. None of this is possible without clear recognition of digital assets as property. If your NFT is then transferred to an innocent buyer, should they be allowed to keep it? There is no answer to this without knowing what kind of property is a digital asset.
The entire decentralized finance (DeFi) industry, which includes cryptocurrencies such as bitcoin, is based on transferring crypto assets to other accounts where they can then be distributed according to smart contracts or other sets of rules.
Do these movements count as some kind of legal transfer of the asset or a security arrangement or some form of custody? These questions may seem unimportant when everything is working smoothly, but as soon as something goes wrong, the participants will suddenly care immensely about them. They will determine who gets back any remaining assets and whether anyone else — cryptocurrency exchanges, developers, and so on — may be liable for any losses. And again, there is no clear answer to any of this until the nature of digital assets as personal property is settled.
