UK LEGAL TASKFORCE PROVIDES LEGAL CERTAINTY ON CRYPTO-ASSETS.
|Blockchain and smart contracts were given a major boost towards becoming a standard method for securely storing and transferring crypto-assets when the expert panel charged with giving the technology legal certainty declared they should be treated in principal as property.|
The much-anticipated legal statement by the UK jurisdiction taskforce of the Law-tech Delivery Panel is expected to reduce the legal doubt that has slowed the adoption of distributed ledger technology by international traders and could make Britain a global centre for digital property disputes.
The Legal Statement was compiled following an extensive industry consultation process. A diverse range of views, ranging from industry participants, technologists and the legal profession, was sought and incorporated. Aside from concluding that crypto-assets, including cryptocurrencies, can be treated as property, it also deemed that smart contracts, if they demonstrate the key defining legal elements of a contract, can be regarded as contracts themselves. In addition, it clarified that a private cryptographic key may be used to meet a “signature” requirement on a contract.
This means that, in any dispute involving either a crypto-asset or a smart contract, existing law on property and contracts will apply. It also means that smart contracts, where they meet the eligible criteria, can be legally enforced in an English court. In other common-law countries, such as Italy, the legal treatment of crypto-assets has largely remained unclear.
According to Richard Hay, Head of UK Fintech at Linklaters, who worked with the group behind the Legal Statement, “The Legal Statement is an important milestone providing much-needed clarity on the legal standing of crypto-assets and smart contracts. It demonstrates the power and flexibility of the common law in adapting to innovation, and in providing the foundations for a truly digital economy.
“For blockchain and DLT, the legal statement answers fundamental questions that many see as having held back development and investment in the space. Uncertainty holds back the creation of new financial structures and products, so the recognition of the legal standing of these developments in English law will be welcomed by investors.”
Jack Thornborough, Group Head of Compliance and Money Laundering Reporting Officer (MLRO) at 2030 Group added, “It is great to see the statement seeking to address the legal uncertainty by recognising digital assets as tradable property and smart contracts as enforceable agreements under English Law, which is something we have supported since we conducted a primary issuance of tokenised equity earlier this year. We are delighted to see smart contracts supported by the legal framework in the UK.
“The lack of legal certainty has been a barrier for adoption, investment and development, and this statement provides the foundation to address the uncertainty around the classification and characterisation of digital assets. By providing investors with increased confidence of their rights and entitlement, the statement provides a dependable foundation for mainstream buy-in from institutional investors.”