The UK Jurisdiction Taskforce has started a consultation exercise on the perceived legal uncertainty about the status of cryptoassets, distributed ledger technology and smart contracts under English private law.
The objective of the UKJT is to demonstrate that English law and the jurisdiction of England and Wales together provide a state-of-the-art foundation for the development and use of DLT, smart contracts and associated technologies. Many aspects of the status of cryptoassets are considered by some to be unclear as a matter of English private law.
Responses to the consultation aim to inform the preparation of an authoritative legal statement, designed to either demonstrate that English private law already provides sufficiently certain foundations, or highlight particular areas of uncertainty that may need to be clarified through legislative reform. The UKJT is seeking input from stakeholders as what should be addressed in the legal statement.
Cryptoassets
Under English private law, there is no general definition of a cryptoasset, and the UKJT recognises that there may exist a great deal of uncertainty as to what is meant, or what is being described, when the term is used.
In particular the consultation poses questions about whether cryptoassets can be regarded as property. It also includes questions about whether a cryptoasset may be characterised as a “documentary intangible” or as being “negotiable” (that is, in the sense that a transferee may, by the mere transfer of a cryptoasset, acquire better title to that cryptoasset than that of its transferor), and whether cryptoassets may be recognised as “goods” for certain statutory purposes.
The UKJT also understands that there is uncertainty among market participants as to whether DLT records of cryptoassets are capable of amounting to a “register” for the purposes of evidencing, constituting and transferring title to certain types of securities under English law.
Smart contracts
The consultation document points out that the concept of a “smart contract” is a broader concept than a “smart legal contract”. It is understood that market participants attempting to replicate contractual arrangements written in prose using smart contracts are principally concerned there should be clarification of the circumstances in which smart contracts are capable of giving rise to binding legal obligations. In addition, a series of ancillary questions arises: how would the general principles of contractual interpretation be applied by an English court in the context of a smart legal contract? And under what are the circumstances in which a statutory signature or “in writing” requirement can be met in the context of smart legal contracts.
Next steps
The consultation ends on 21 June 2019 and responses should be submitted viaThe Law Society website.A public event to discuss the consultation questions will be held on 4 June 2019 at Barclays Rise, London. It is intended that the legal statement will be published in late summer of 2019, with a view to then considering if any further steps are necessary or appropriate.
