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UK legal body recommends new framework for using crypto as collateral

2min Read

The UK crypto framework needs to be bespoke for using cryptocurrency as collateral, the Law Commission recommends.

U.K. crypto

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  • The scope of such a framework would go beyond existing UK regulations around collateral arrangements.
  • The Commission previously stated that its goal coincides with the government’s goal to transform the UK into a digital asset hub.

The UK Law Commission has recommended creating a bespoke crypto framework for using crypto assets as collateral in the nation.

The Commission, funded by the Ministry of Justice, indicated that the scope of such a framework would go beyond existing UK requirements for collateral arrangements for traditional finance.

The commission also reiterated its prior proposal for the UK to classify crypto assets as a new category of property. It also proposes that the government form a panel of technical experts, legal practitioners, academics, and judges to advise courts on difficult legal issues involving virtual assets.

The Commission made these recommendations in a report published on 28 June. The report is the result of the first ever government-commissioned analysis in the UK, as per the Law Commission of England and Wales, on how existing legal frameworks can accommodate crypto assets and non-fungible tokens (NFTs). The independent group, comprised of lawyers, judges, and professors, provides suggestions for legal reform that the government may choose to implement.

Existing UK crypto rules not adequate, Commission claims

The proposals of the commission do not apply in Scotland or Northern Ireland, which have their own legal systems. Although existing rules in England and Wales allow for the use of cryptocurrency as collateral, the commission deemed those choices “inadequate.”

The commission said,

“As such, we recommend that, as a matter of priority, the Government sets up a multi-disciplinary project to formulate and put in place a bespoke statutory legal framework that better and more clearly facilitates the entering into, operation and enforcement of certain crypto collateral arrangements.”

According to the commission, such a framework would need to adapt to the way crypto works, including how one stores, transfers, and controls these assets.

Last year, the Commission stated that its crypto proposals coincide with the Conservative government’s goal to transform the United Kingdom into a digital asset hub under Prime Minister Rishi Sunak’s leadership.


Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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