The U.K. government has introduced a bill to Parliament that seeks to clarify the legal status of digital assets, including cryptocurrencies, non-fungible tokens (NFTs), and tokenized real-world assets (RWAs), defining them as personal property under British law.
The proposed legislation provides guidelines for the legal profession in cases of ownership disputes, such as during a divorce, and to offer protection to crypto owners affected by fraud or scams. The bill introduces a new category of property beyond the existing categories of “things in possession,” such as money and cars, and “things in action,” such as debts and shares.
Justice Minister Heidi Alexander stated that the new category would allow specific digital assets to be recognized as personal property. “This will provide greater clarity and security for those holding digital assets,” Alexander said.
Earlier this year, the Law Commission, which advises on law reforms in England and Wales, released a consultation on draft legislation to categorize crypto as property. The Commission’s report concluded that some digital assets do not fit neatly into the categories of “things in possession” or “things in action” but should still be considered capable of attracting personal property rights under English and Welsh law.
Interestingly, the news comes shortly after the FCA reported that 87% of cryptocurrency companies that applied for licensing under the country’s money laundering rules failed to secure approval in its latest fiscal year.
Out of 35 applications received in the 12 months ending March 31, only four managed to qualify, according to the FCA’s annual report.
Successful applicants included BNXA, Binance’s payments partner; a U.K. unit of PayPal; and Komainu, a crypto custody joint venture of Nomura. The remaining applications were either rejected or withdrawn for lacking necessary components.
Since taking on the role of overseeing crypto firms under anti-money laundering regulations in 2020, the FCA has received 359 applications but has granted money laundering registration to only 44 companies.
The challenging registration process prompted some crypto companies to leave the U.K. in search of easier registration processes elsewhere. Complaints include long wait times, a lack of feedback, and what some describe as unfair treatment by the regulator.
The FCA’s new rules demand crypto firms to ensure their marketing is “clear, fair, and not misleading,” incorporating prominent risk warnings and eliminating incentives like “refer a friend” bonuses. A 24-hour cooling-off period for new investors and stringent advertising guidelines are also part of the regulations.
The new regulations also require firms promoting crypto products or services to include a clear risk warning in their promotions and verify that individuals have the necessary knowledge and experience to invest in cryptocurrencies. Non-compliance could result in penalties, including up to two years in prison.
The impact of these regulations is already visible in the UK’s crypto market, with firms like Bybit and PayPal withdrawing certain services. Luno, another prominent crypto company, has restricted some clients from investing in cryptocurrencies on its platform.
