UK Law Commission expects 'substantial impact' from digital asset law review

Legal jurisdictional issues relating to cryptocurrencies and digital assets have necessitated a law reform project sponsored by the Ministry of Justice.

The Law Commission of England and Wales hopes to establish the United Kingdom as a leading jurisdiction for grappling with legal disputes involving emerging technologies like cryptocurrencies, digital assets and electronic documentation.

The project, dubbed "Digital Assets: Which Law, Which Court?" was announced on Oct. 18 with the aim of reviewing international legal challenges involving cryptocurrencies and providing recommendations for legal reform in the United Kingdom.

Cointelegraph reached out to Professor Sarah Green, Law Commissioner for Commercial and Common Law, to unpack the driving force behind the authority's latest law reform project. The U.K.’s legal review body has previously conducted projects aimed at smart contracts, digital assets and decentralized autonomous organizations.

According to Green, the previous law reform projects identified several issues in determining which laws apply to international tech-related disputes and which courts should reside over them.

Related: UK gov't introduces bill aimed at empowering authorities' to 'seize, freeze and recover' crypto

As Green explained, existing rules of private international laws applicable to property disputes are based on the property in question having clear, definitive locations. This gives a clear connection to a particular legal jurisdiction.

Given that digital assets and emerging technologies do not typically fit this "traditional mold," existing  laws for disputes involving digital assets and the courts that should hear them are not necessarily fit for purpose:

“This has resulted in an element of uncertainty regarding how a court may apply the existing rules. Indeed, English courts have already had to grapple with the difficult question of where certain digital assets are located for the purposes of establishing jurisdiction in relation to international defendants.”

Green then gave a couple of examples of legal disputes in 2020 and 2021. These cases were hamstrung by the difficulty of determining the jurisdiction of the digital assets involved. The process is crucial in deciding if a claimant can serve proceedings in a given court or country. As Green highlighted, the cases in question provided real-world instances that call for legal clarity:

“The issues are not abstract or hypothetical, but real and tangible." 

The Law Commission will aim to produce a report setting out recommendations for reform in the context of private international law and digital assets. This will then be put out for public consultation with draft recommendations for law reforms in the second half of 2023.

Green highlighted her belief that the project would have a substantial impact on the status of English law as a preferred choice of law and jurisdiction to adjudicate disputes:

“It is all very well proposing reforms to English domestic law, but to extract the full benefit of those reforms, they should ideally be accompanied by reforms to the rules that determine whether English law applies and whether English courts can hear the dispute in the first place.”

The U.K. Law Commission proposed a number of law reforms aimed at providing wider recognition and legal protections for cryptocurrency and digital asset users in July 2022. The move was driven by rapid growth in ownership and trading of nonfungible tokens (NFTs) and cryptocurrencies in the country.