Crypto Lending Needs Clearer Oversights: UK Law Commission Head

Updated: 05 July 2023

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The crypto industry is witnessing an increasing demand for regulatory clarity from various regulatory bodies worldwide.

In a new development, a crypto-centric legal advocate has called for more regulatory clarity of British laws on cryptocurrency lending.

Crypto Needs ‘Distinct’ Category

The crypto industry has experienced a surge in regulatory action and oversight, with increased scrutiny from authorities.

As part of this trend, a recent review of the application of British laws on digital assets indicates the need for regulatory clarity around cryptocurrency lending.

🚀💼 The UK Law Commission is pushing for clear regulations on crypto lending!🔎🧐 How important is it to establish guidelines to protect investors and ensure the integrity of the financial system? Let's discuss!💬💡 #CryptoLending #Regulations #FinancialSystem #UK

— Moonner (@Moonner_Crypto) July 5, 2023

Led by lawyer Laura Burgoyne, the review points out the UK Law Commission’s core recommendations to the government.

The most crucial aspect of the agency’s recommendations is the making of an entire ‘distinct’ category of personal property for cryptocurrencies.

This is to accommodate and protect the unique features of these blockchain-based assets.

8️⃣ The Law Commission emphasizes the need for a THIRD category of personal property law to accommodate digital assets.

— Keyur Rohit (@CryptoKingKeyur) July 5, 2023

The recommendations arose from the government’s mandate to analyze the common law framework and explore ways to make it more accommodating for cryptocurrencies, non-fungible tokens (NFTs), and other virtual assets.

Additionally, the review calls for the establishment of an industry-specific body and a legal framework.

There is also a clear annotation that legal reforms should be expanded to ascertain whether the nascent asset class comes under the regulatory oversight of the Financial Collateral Agreements Regulations (FCAR).

Providing more context, Burgoyne highlighted the importance of having clearer guidelines for crypto lending.

She emphasized that the involvement of the FCAR could play a crucial role in enabling legacy financial intermediaries to receive security (collateral) over digital assets.

This involvement would also give them a level of freedom from the restrictions and formalities that often burden the traditional financial landscape.

Speaking further, the legal practitioner stated that the government agency plays a crucial role in the use and regulation of collateral arrangements and could carry its well-oiled system into the crypto space.

This would provide more market certainty for crypto investors in the United Kingdom, as the FCAR could facilitate collateral agreements on various digital assets, central bank digital currencies (CBDCs), and stablecoins.

To her, FCAR’s regulatory jurisdiction is more or less a matter of legal interpretation hence why the Law Commission feels the matter should be reviewed and all pain points addressed.

Why the organization is calling for a revisit of cryptocurrencies and lending these assets boils down to real-world use cases of digital assets.

According to the agency, cryptocurrencies can easily be viewed as collateral if they are viewed as ‘cash,’ ‘financial instruments,’ or ‘credit claims.’

In such a case, the FCAR would be the suitable oversight body for re-labeling crypto assets.

Recommendations to Provide ‘Fair’ Solutions On Crypto

The Law Commission has spent over eight months considering all the legal ramifications around digital assets.

In its recent release, the organization has pointed out that its recommendations aim to provide fair and workable solutions for the unique challenges posed by the nascent asset class.

9️⃣ The Law Commission's recommendations aim to provide FAIR, WORKABLE solutions for the unique challenges posed by digital assets.

— Keyur Rohit (@CryptoKingKeyur) July 5, 2023

Burgoyne was quick to point out that the current laws of ‘things in possession’ and ‘things in action’ surrounding personal properties cannot properly accommodate digital assets.

Forcing it into either could result in regulatory complications, potentially harming the emerging industry.