The UK Jurisdiction Taskforce (“UKJT“) recently published a consultation paper on the status of cryptoassets, DLT, and smart contracts under English private law.
The UKJT is one of the six taskforces of the LawTech Delivery Panel created by the Law Society of England and Wales. The LawTech Delivery Panel was set up in October 2018 and is formed of a team of industry experts and leading figures from government and the judiciary, aimed at helping the UK legal sector grow and fulfil its potential.
The certainty of laws is a key criteria for doing business in any country. The UKJT believes that the English common law system is flexible and well placed to adapt to fast changing technologies. However, the UKJT recognises that there is currently some uncertainty as to how DLT technologies are positioned under the English legal system. In particular, could the development of smart contracts redefine the principles used to establish whether a contract has been formed under English law?
In addition, the rise of cryptoassets is causing lawyers to re-evaluate how they look at property. After all, at their core, cryptoassets are simply a string of code accessible only to those who hold the private key. Traditionally, English law recognises physical items (choses in possession) and legal rights (choses in action) as property. Establishing whether cryptoassets are capable of falling under either of these categories (or some other category of property) is considered fundamental to the application of English private law to transactions involving them.
The UKJT believes that “smart contracts will only finally take off when market participants and investors have confidence in them” and that “mainstream investors still need to be convinced that their legal rights can be protected when they trade in cryptoassets and enter into smart contracts.” The taskforce considers that the key reason for the lack of confidence is the legal uncertainty. For that reason, the UKJT has launched this public consultation to identify the key legal questions that need to be answered.
In the consultation paper, the UKJT calls for clarification on the legal status of cryptoassets and how title to these are transferred as well considering the enforceability of smart contracts more generally. The aim of the UKJT in this consultation is to prepare “an authoritative legal statement on the position of cryptoassets and smart contracts under English private law. The intention is that the statement will either demonstrate that English private law already provides sufficiently certain foundations in relation to the relevant issues, or will highlight particular areas of uncertainty that may be ripe for further clarificatory steps to be taken.” The consultation is split into four annexes: Annex 1 contains the questions to be addressed in the legal statement; Annex 2 contains an overview and key features of DLT; Annex 3 discusses the meaning of “cryptoasset”; and Annex 4 outlines the key elements of smart contracts.
The consultation will remain open for responses until 21 June 2019, and it is intended that the legal statement will be published in late summer 2019.
Written responses to the consultation questions should be provided by:
- completing the form set out at the following link: https://www.lawsociety.org.uk/news/stories/cryptoassets-dlt-and-smart-contracts-ukjt-consultation; or
- by email to [email protected].