British courts could award remedies like damages in cryptocurrencies, the Law Commission said in its Digital Assets Consultation paper today.
“There is an arguable case for law reform to provide courts in England and Wales with the discretion to award a remedy (where traditionally denominated in money) denominated in certain crypto-tokens in appropriate cases,” the Commission said as it set out proposals to reform the law around regulating crypto in the UK.
The Commission argued that monetary remedies do not necessarily have to be granted in British pounds in all cases as damages can also be awarded in foreign currencies if that accurately reflects the claimant’s loss.
It said that this could be true for crypto cases where parties agree to use crypto as their medium of exchange and might help prevent currency conversion disputes.
The paper said that in cases where parties contract using crypto, they accept the risk of price fluctuations and hedge against this risk as parties that deal in foreign currencies do.
“Such a reform might help cater for the commercial expectations of parties dealing with crypto-tokens.”
The Commission did not make a proposal on this matter and instead posed it for consultation.
The Commission also recognised the legal barriers preventing crypto tokens to be used by the court in granting damages. It said it was not aware of any legal precedent allowing courts to grant damages in crypto, partly due to crypto unlikely to be considered money or currency presently.
“It appears highly unlikely that line of case law [permitting monetary remedies to be denominated in foreign currencies] would be extended to allow monetary awards in [crypto-tokens].”
It said there was similarly no legal precedent allowing for damages in commodities like gold or oil, and would be a radical step to allow this. But crypto is also different to commodities in that it is completely fungible and damages in crypto would not be faced with concerns of quality or condition and benefited from ease of availability, it said.
“Crypto-tokens can be easily stored, received and/or transferred at relatively little expense between the judgment debtor and judgment creditor,” the Commission noted.
The Commission also proposed that crypto assets come under a distinct new category of private property called “data objects.”
The Commission’s paper come as the UK seeks to set up a regulatory framework for crypto and establish itself as a global crypto hub.