Meanwhile, other jurisdictions continue to compete to attract investors and businesses seeking to enter the digital assets space, with Singapore and the United Arab Emirates particularly leading the charge, aiming to perfect their own regulations and laws.
So how do they compare?
The Money Authority of Singapore sees the greatest potential in stablecoins – its October 22 Consultation Paper on Regulatory Approach for Stablecoin-Related Activities viewed stablecoins as a potentially credible digital medium of exchange – subject to ample regulation and financial arrangements, such as sufficient reserve assets. Subsequently, this month it has just confirmed that Singaporean-based crypto service providers will be required to deposit customer assets under a statutory trust before the end of the year for safekeeping. This is a positive step for consumers. However, on the legal status of digital assets, Singapore’s High Court has only confirmed this week that the holder of a crypto asset has in principle an “incorporeal right of property recognisable by the common law as a thing in action and so enforceable in court.”
This ruling indicates that, at long last, Singapore has caught up with the English common law position as at 2019, which marked the point at which the English Court first held that cryptocurrencies are a form of property capable of being the subject of a proprietary injunction. It will be interesting to see how the law continues to develop there.
Meanwhile, the UAE has taken greater strides to implement “virtual asset” regulations. In 2022 Dubai established the Virtual Assets Regulatory Authority (“VARA”) which describes itself as “the world’s first independent regulator for virtual assets.” It assists with managing regulations for advisory, exchange, and financing activities. Additionally, the UAE has established the Securities and Commodities Authority, its federal securities regulator which has overall responsibility for supervising and regulating the virtual assets sector. The establishment of these entities is reflective of the Emirates’ government-centric approach to the development of digital asset regulation.
On the other hand, the legal position on the treatment of digital assets as property is less clear. In a recent decision from the Ras Al-Khaimah Primary Court, bitcoin was described as “a digital currency that does not meet the legal and Sharia criteria that make it a currency subject to the rulings of dealing with official legal currencies recognised internationally.” The regulatory and legal positions may therefore be at odds, and it will be interesting to see whether there is future convergence.
Striking a balance
The Law Commission has signalled that the recipe for success in the UK lies in cooperation between the judiciary and its government and industry counterparts.
Other jurisdictions appear to be prioritising regulatory developments but are lagging on the legal classification of digital assets as ‘property,’ potentially restricting the redress available to domestic and foreign investors seeking to enforce their personal property rights in the event of a dispute. For now, maybe the UK has the edge and, if the government seeks to adopt some of the Law Commission’s proposals, it will arguably be further out in front – watch this space.