The Law Commission for England and Wales has began two new strands of work related to smart contracts and digital assets.
They are to analyze the current English legal system to see if there are any gaps in the law and identify reforms.
“The work on digital assets will ensure that the law is capable of accommodating electronic documents, cryptoassets and other digital assets in a way which allows the possibilities of technology to flourish,” they say.
They use the simple example of possession which as currently legally defined, a digital document can not be “possessed” because the law has developed with actual documents in mind.
They raise a number of other aspects, like what happens if the code does not do what the coder intended it to do due to some bug.
“These questions need to be answered so that English law maintains its reputation for sophistication, coherence, and efficacy, and so that businesses can be confident in their use of smart contracts,” they say.
The overall tone is “to ensure that the law can meet the growth in the use of this technology.” Suggesting their priority is to facilitate networks like ethereum and their usage as far as the law is concerned.
This comes just weeks after the European Union announced its intentions to put forth a legal framework that includes a crypto single market and regulations regarding the custody of assets backing stablecoins.
The most difficult legal question both in London and in Brussel is regarding crypto stocks or e-stocks as Germany calls them.
That is whether say a start-up that potentially goes on to become the next Apple can have an Initial Public Offering (IPO) by only issuing a token with that token itself granting ownership of the company, voting rights, entitlement to dividends, and everything else that a stock provides.
That’s a difficult question because every stock issued in this way is effectively cash. It would be volatile however and not something you’d use to buy bread, but code systems can easily develop to conveniently allow the exchange of that stock for a house without going through the banking system.
As it stands the law is fully and solely designed for a paper stock system with the internet changes then squeezed in through adhoc patchwork modifications.
For something that is effectively a bitcoin-stock, the efficiencies and benefits are self evident as the Defi space is showing and as more innovation to come will show, but how to facilitate that fully while also ensuring hacked stocks don’t buy a house, is not an easy question.
Both the English law and the European law have tackled many difficult questions however in their millennial long history, and just how sophisticated as well as efficient either of them is, remains to be seen with these two negotiating jurisdictions now in a race of sorts to facilitate a new wave of digital innovation.