UK Agency Request New Property Category for Crypto Assets, US SEC Sued Over NFTs Status

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The quest for a more robust and transparent legal framework has intensified as the crypto industry expands rapidly. Over the past few weeks, there has been a notable shift in the regulatory treatment of crypto assets in various regions, from the UK to the US and Asia. 

Below are some of the latest updates in crypto regulation, including developments in the FTX Bankruptcy proceedings.

UK Law Commission Proposes New Property For Crypto Category

The Law Commission for England and Wales urged the UK government to categorize crypto assets as personal property. 

The commission proposed this in a supplemental report published on July 30. The report addresses legal gaps in the current classification of personal property and how they affect crypto assets.

Today we have published a supplemental report and draft Bill on Digital assets as personal property. Find out more here: https://t.co/XQ39tQfWCW

— Law Commission (@Law_Commission) July 30, 2024

According to UK law, personal property has two main classes: tangible possession/property and intangible property (including rights or debts). The agency argued that virtual assets, including cryptocurrencies and NFTs, can be both, complicating court dispute resolution.

Therefore, the Law Commission proposed that the government establish a third property category to ensure a precise and statutory classification of crypto assets.

Further, the agency issued a draft bill requesting a distinct category for crypto assets for a more transparent and robust legal framework in England and Wales. This will enhance the growth of the crypto asset sector in the region.

Artists Sue SEC over Confusing NFTs Status

Two artists, songwriter Jonathon Mann and filmmaker Brian Frye, recently charged the US SEC to court to clarify whether NFTs are securities. The plaintiffs’ lawyers demanded clarification on what actions could violate US securities laws while creating and selling NFTs.

Proud to represent my client and friend Jonathan Mann @songadaymann in his brave and unfortunately necessary lawsuit against the SEC.

Art is not a security, and musicians working in a digital medium should not have to hire expensive securities lawyers just to release music. https://t.co/FBYL9FZZfG

— Jason Gottlieb (@ohaiom) July 29, 2024

According to the case filing, many attorneys have asked whether artists must register their NFTs before selling. They have also questioned whether public disclosures about the potential risks of buying the arts are required. 

Further, the artists’ attorneys cited Taylor Swift’s concert tickets as an instance. They argued that the SEC classifying NFTs as securities would be ludicrous. 

Last August, the SEC sued Impact Theory, an LA-based media company, for violating securities law by selling its Founder’s Keys NFT collection. 

Consequently, the suit demands injunctive and declaratory relief against potential unlawful enforcement actions against NFT projects from the SEC.

New Bill Proposes More Authority to Secret Service to Combat Crypto Crime

On August 2, two US Senators, Catherine Cortez Masto and Charles Grassley, introduced a new bill seeking more power for the Secret Service to clamp down on crypto crimes. 

If approved, the bill, titled Combatting Money Laundering in Cyber Crime Act of 2024, will enable Secret Service officers to investigate illegal crypto transactions. 

In an X post, Senator Cortez Masto emphasized the bill’s importance. She noted that funding criminal activity via digital assets threatens national security.

My new bill with @ChuckGrassley gives the Secret Service the tools to investigate criminal organizations using digital assets to evade the law.

The Secret Service plays a critical role in combatting financial crime, and our bill will ensure they can continue to keep us safe.

— Senator Cortez Masto (@SenCortezMasto) August 4, 2024

Also, Senator Grassley said more robust threat assessments would help catch illegal financial enterprises that facilitate money laundering. 

FTX Class Action Lawyers Request Dismissal of Law Firm Sullivan and Cromwell 

Last week, on July 29, class action lawyers representing FTX creditors filed a motion to dismiss the Sullivan and Cromwell (S&C) law firm. The lawyers alleged that Sullivan and Cromwell violated the code of conduct of legal practices by aiding and abetting FTX’s fraudulent activities. 

According to the filing, S&C created misleading strategies that aided the defunct exchange’s misconduct. 

The class action lawsuit, filed in February this year, seeks compensation for multiple counts of offenses. The alleged S&C offenses include aiding and abetting fraud, civil conspiracy, and aiding and abetting fiduciary breaches. 

Sullivan and Cromwell is the law firm overseeing FTX’s bankruptcy proceedings. The law firm was also the defunct exchange’s counsel in multiple deals.