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2024-11-29 12:11:05In June 2023, the Law Commission of England and Wales published its final report on digital assets, concluding that the existing common law is generally flexible enough to accommodate digital assets, including crypto-tokens and non-fungible tokens (NFTs). However, to address specific areas of uncertainty, the Commission recommended targeted statutory reforms and the establishment of an expert panel. Key Conclusions and Recommendations: 1. Recognition of a Third Category of Personal Property: Traditional English law classifies personal property into two categories: “things in possession” (tangible items) and “things in action” (enforceable rights). Digital assets do not fit neatly into either category. The Commission recommended legislation to confirm the existence of a distinct third category of personal property to better accommodate digital assets.  2. Development of Common Law: The Commission emphasized that the common law is well-suited to adapt to the complexities of emerging technologies and should continue to evolve to address issues related to digital assets.  3. Establishment of an Expert Panel: To assist courts in navigating the technical and legal challenges posed by digital assets, the Commission recommended that the government create a panel of industry experts, legal practitioners, academics, and judges. This panel would provide non-binding guidance on issues such as control and transfer of digital assets.  4. Facilitation of Crypto-Token and Crypto-Asset Collateral Arrangements: The Commission proposed the creation of a bespoke statutory legal framework to facilitate the use of digital assets as collateral, addressing current legal uncertainties in this area.  5. Clarification of the Financial Collateral Arrangements Regulations: The report recommended statutory amendments to clarify the extent to which digital assets fall within the scope of the Financial Collateral Arrangements (No 2) Regulations 2003, ensuring that existing financial regulations appropriately cover digital assets.  Overall, the Law Commission’s report underscores the adaptability of English common law in addressing the challenges posed by digital assets, while also identifying specific areas where legislative action is necessary to provide clarity and support the evolving digital economy.