The Law Commission of England and Wales – a statutory independent body tasked with reviewing and updating the law – wants to extend property rules to cover crypto and non-fungible tokens (NFT), according to a consultation paper published Thursday.

Aside from legally defining digital assets as personal property, the proposed reforms could make it easier for crypto investors to claim losses in hacks or scams through legal action.

“A lot of people just invest in NFTs, but they don’t ask the question ‘what happens when things go wrong?'” Commercial and Common Law Commissioner Sarah Green told CoinDesk in an interview. “It’s not clear at all what happens if you hack into my wallet and take my bitcoin or if … this system fails and I can’t access my bitcoin.”

The seemingly crypto-friendly proposal is aimed, in part, at helping the U.K. government’s goal of turning the country into a global crypto hub, the commission said in a statement. The commission’s proposals, however, would not apply in Scotland or Northern Ireland, which have their own legal systems.

Last week financial regulators also proposed rules to Parliament that would recognize stablecoins – which are asset-backed cryptocurrencies – as legal means of payment. More stablecoin regulations are on the horizon, and the government is planning a consultation on crypto as investment assets for the end of the year.

In the consultation paper, which invites views from legal and tech experts, the commission steers clear of cryptocurrencies that function simply as means of payment. Instead, it focuses on digital assets that can be traded, used to represent other assets or used as stores of value.

The paper also argues that existing property laws can’t sufficiently accommodate digital assets, owing to their “many different features” and “unique qualities” when compared with traditional physical assets.

“The law must therefore go further to acknowledge these unique features, which in turn would provide a strong legal foundation for the digital assets industry and for users,” the commission said.

According to the document, property law in England and Wales currently recognizes two types of personal property: “Things in possession,” which include tangible objects like a “bag of gold,” and “Things in action” for property like company shares that can “only be claimed or enforced through legal action.”

To accommodate digital assets, the Law Commission is proposing the creation of a new category called “data objects” that would account for things composed of data in an electronic form like databases, software, digital records, domain names and crypto.

The creation of a third category would allow for a more nuanced consideration of new, emergent and idiosyncratic things, according to the document.

“It would allow the law to develop by analogy with things in possession or things in action where appropriate, while also recognizing that certain things do not fall neatly within either category,” the consultation said.

The Law Commission has been working on rules for digital assets since last year, and is halfway through its project. Commission evaluations typically take 18 months to complete. The public consultation on the rules is set to end Nov. 4.

In a project that ended in 2021, the commission concluded that existing laws can accommodate smart contracts that automatically execute and document digital transactions between agreeing parties.

The government has also asked the commission to look into rules for decentralized autonomous organizations (DAO), which are blockchain-based governance bodies. It will explore laws for DAOs once the digital assets project has been completed.

CORRECTION (July 28, 08:11 UTC): Clarifies throughout that the commission covers law only for England and Wales, not the whole of the U.K.

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