The inextricable rise of cryptocurrency since its arrival in 2009 has presented a problem as to how to regulate and define it. There is no global consensus as to whether it should be warmly embraced or banned, with some countries opposed to its use and will not permit it to be used. Others see a future and welcome the innovations of blockchain and decentralised finance. The world authorities and legal systems are still trying to define and regulate cryptocurrency as a unique concept.
However, England and Wales is both flexible, resilient and open to new concepts. The Law Commission has produced a report on digital assets and how they can be regarded as things to which personal property rights can relate. Whilst the report focuses on a particular subset of digital assets, it shows the way that current digital assets, as well as future technical advances in all the variant forms can be held. This, in turn, is an effective way to bring the current law into line with expectations of all parties that have significant dealings with these assets.
Demetri Bezaintes, an associate, commented "The existing laws of England and Wales have been flexible enough to provide a framework for several types of crypto assets. Notwithstanding the common law's adaptability, certain digital assets seem to not exactly fit within the traditional categories of property, i.e. tangible and intangible. They are not tangible and they sometimes differ from rights-based assets such as securities". Demetri further pointed out that "a "third" category to which personal property rights can relate will be introduced. The Law Commission concludes that some digital assets are neither things in possession nor things in action, but that nonetheless the law of England and Wales treats them as capable of being things to which personal property rights can relate. The Courts are required to determine which objects (specific tokens etc.) will fall into this new category of personal property"
Personal property rights form an extremely important aspect to legal systems and also to the economic stability of society and must be clearly defined to form legal relationships involving commercial and private transactions, succession and the provision of collateral arrangements. Also, in the event of fraud or theft the establishment of personal property rights over an asset enhances the possibility to restore lost assets. There is a considerable amount of legal certainty in the current securities framework, however, the law may need to evolve to incorporate the different features seen in crypto-tokens and digital assets.
The Law Commission report concludes that in the development of a new regime particularly related to digital assets and collateral arrangements could give the markets a robust set of laws sufficient legal certainty and considers that the Government should regard this as a matter of some urgency and takes measures to put in place a bespoke statutory legal framework that offers clarity to the way in which the assets enter into operation and provides enforcement to the designated crypto- tokens and crypto-assets collateral arrangements.
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Demetri Bezaintes is an associate based in the London office within the Financial Services and Crypto Litigation Department. He is an SRA-regulated Registered Foreign Lawyer (RFL) in England & Wales and a qualified Greek Lawyer.(dikigoros).
Demetri has a thorough knowledge of investment fraud and fund tracing. He works tenaciously for our clients, advising on cryptocurrency, Forex trading disputes and regulatory investigations. He draws his expertise in investment law from his experience in the banking sector and his studies in banking and financial services regulation. Before joining Giambrone & Partners Demetri worked at an international bank, where his main focus was the enforcement of freezing orders and third-party debt orders.
He approaches cross-border jurisdiction matters with a comprehensive view, based on his knowledge of both civil and common law. After qualifying as a lawyer in Greece, he obtained a Graduate Diploma in Law from the University of Westminster and is currently studying for the LPC at the University of Law.
Demetri also has experience of assisting high net worth individuals (HNWI) with real estate transactions arising from the Golden Visa scheme.
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