Since Satoshi Nakamoto launched Bitcoin to the public in 2009 on the back of the Cypherpunk movement, Bitcoin and other crypto assets1 have touted a payment system free from a decentralised system of control.
The huge growth of crypto assets over the last 15 years has had a significant impact on business and finance. It has also created numerous complex issues for governments and individuals alike.
A key question that will arise for legal practitioners in advising their clients with interests in crypto assets interests is whether (and in what circumstances) those interests, or those crypto assets, are considered to be property?
In Australia, there is yet to be a definitive answer to that question.
Careful consideration of that question will help practitioners ensure their advice is as useful to their clients as possible.
This article will address the following issues:
- what is the legal status of crypto assets as property overseas?
- what is the legal status of crypto assets in Australia?
- What are some of the issues that arise for clients and practitioners?
Overseas treatment of crypto assets
Courts outside of Australia are moving towards accepting that crypto assets are property. Recent decisions in the United Kingdom, Singapore, New Zealand and Hong Kong affirm that position.
The recent decision of the High Court of England and Wales in Fabrizio D’Aloia v Persons Unknown Category A & Ors2 concerned an action by Mr D’Aloia against the defendants, to one of whom he had transferred a quantity of the cryptocurrency ‘Tether’ (USDT).
Although Mr D’Aloia was ultimately unsuccessful as it could not be established that the USDT was actually received by the defendant, the Court held that although USDT was neither a chose in possession nor a chose in action, under English law it was still capable of attracting property rights. At [158] Deputy High Court Judge Richard Farnhill said:
That decision followed earlier decisions, in Tulip Trading Limited v Bitcoin Association for BSV (in the Court of Appeal)3, and in AA v Persons Unknown (High Court)4, each of which held that crypto assets are property.
In Singapore, the High Court in ByBit Fintech Limited v Ho Kai Xin5 found that crypto assets (again USDT) were a chose in action notwithstanding that they could be transferred ‘cryptographically without the assistance of the legal system’. Accordingly, the Court held that crypto assets met the criteria for property and could be held in trust.
The High Court of New Zealand in Ruscoe v Cryptopia Limited (in liq),6 considered the competing arguments in detail. The Court ultimately concluded that crypto assets could satisfy the criteria expressed in National Provincial Bank Ltd v Ainsworth7 and therefore property.
The Hong Kong Court of First Instance in Re Gatecoin Limited (In Liquidation)8 also ruled that cryptocurrency was property and could therefore be held in trust by the liquidators of Gatecoin Limited. The Court followed the reasoning in Ruscoe v Cryptopia, noting that Hong Kong courts have consistently applied and followed the principles expounded in Ainsworth as to whether a right or interest meet the requirements for property.
Overseas legislation
Overseas governments have also moved towards specifically legislating the issue. As an example, on 11 September 2024 the Property (Digital Assets etc) Bill was introduced in the House of Lords in the United Kingdom.
The Bill aimed to implement recommendations of the UK Law Commission in its 2023 final report on Digital Assets, that crypto assets can attract property rights.
Among its conclusions the Law Commission concluded that some digital assets were neither choses in possession nor choses in action, but were capable of being assets to which personal property rights could relate.
Legal position in Australia
Australian jurisprudence on this issue is still developing. In general however, courts in Australia appear to lean toward the view that crypto-assets are property.
In a number of decisions, particularly in the regulatory context, courts have made orders about crypto assets as though they are property, without considering in any detail the conceptual basis for that assumption. In Australian Securities and Investments Commission v A One Multi Services Pty Ltd9 for example, orders were made by the Federal Court for the appointment of receivers over the property of the company which included crypto-assets.
Likewise, in Chen v Blockchain Global Ltd; Abel v Blockchain Global Ltd,10 the Victorian Supreme Court made property injunction orders in relation to Bitcoin, under the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
Similarly, crypto assets were treated as property under the Proceeds of Crimes Act (Cth) by the New South Wales Supreme Court in the Commissioner of the Australian Federal Police v Kogan,11 and the Commissioner of the Australian Federal Police v Bigatton.12
Similar approaches have been taken in the Family Court, in including the value of crypto-assets in the assessment of property interests of parties in family proceedings. See for example Powell & Christensen;13 or Wade v Alawi.14
In three recent decisions the Federal Court has considered the property status of crypto assets in more detail, but no concluded view has been reached:
- in Australian Securities and Investments Commission v Bit Trade Pty Ltd,15 Nicholas J stated that an obligation to pay an amount of cryptocurrency was not an obligation to pay a sum of money and therefore could not be a debt, although his Honour noted that breach of an obligation to pay an amount of cryptocurrency might result in a claim for damages for breach of contract.
- in Australian Securities and Investments Commission v NGS Crypto Pty Ltd (No 3)16 Collier J held that at an interlocutory level, the definition of property under the Corporations Act 2001 (Cth) was sufficiently broad to encompass crypto-assets in appropriate circumstances.17
- in Australian Securities and Investments Commission v Web3 Ventures Pty Ltd,18 Jackman J referred to the “legal controversy as to whether cryptocurrency is property, as that concept is understood by the common law”.19 Although his Honour did not reach a concluded view, he held that in the circumstances of the case before him the reference to cryptocurrency might be thought to assume the existence of property rights.
Despite not reaching a concluded view of the question in Web3 Ventures, Jackman J also recently delivered a paper (on 21 June 2024) titled ‘Is Cryptocurrency Property?’, in which his Honour set out his view that crypto-assets could be considered property under the law.
The Australian Treasury (in its Token Mapping Consultation Paper released in February 2023) and the Australian Law Reform Commission (in its report “Confronting Complexity: Reforming Corporations and Financial Services Legislation” released on 18 January 2024) have also begun to grapple with the question of how to regulate crypto-assets, although no settled view has yet taken hold.
Some issues arising for practitioners
The present position in Australia then is that while courts often assume that crypto assets are property, or can be treated as property, practitioners should take care to consider carefully questions relating to their clients’ interests in, or dealings with, crypto-assets.
That may include considering the nature of the particular crypto-asset and the function that it is intended to perform. It will likely include careful consideration of the particular document or legislation involved. For example:
- how should crypto assets be referred to in wills? Does s. 8 of the Succession Act 1981 (the property that may be disposed of by will) apply? If the crypto-assets themselves are not (or may not be) property, do they create or secure other more tangible rights or interests? How are those rights or interests to be referred to or secured?
- is the relevant property interest in tangible items such as cold (or warm) wallets, or passwords? Or is the property interest (if any) in a particular record on the blockchain? Or the right to redeem for fiat currency?
- can crypto assets be the subject of a trust?
- can receivers be appointed over crypto assets? If so, what exactly are the assets over which the appointment operates?
- is the position different if the receiver is appointed pursuant to the powers in s. 1323 of the Corporations Act 2001 (Cth) than under the general law? What are the powers the receiver may exercise?
- does proceeds of crime legislation apply to crypto assets?
None of these questions necessarily permit simple or straightforward answers. In each case practitioners will need to identify with precision what the relevant crypto asset is, how it operates, and how it is controlled.
Due to the nature of crypto assets, the means of control (for example wallets and passwords) will usually, if not always, be as important as more esoteric questions about the nature and effect of the crypto assets themselves.
Novel and interesting questions will continue to emerge. Until the courts and legislatures have addressed these issues in more detail, practitioners and their clients will be well served to take a careful and nuanced approach.
Authored by Mark Steele KC, Brisbane barrister and member of Northbank Chambers and Roman Micairan, Brisbane barrister and member of Higgins Chambers.
Footnotes
1 For the purpose of this article we have use the term ‘crypto-assets’ to refer to digital items utilising blockchain technology, and would include ‘crypto-coins’, ‘cryptotokens’, or ‘NFTs’. The term is also interchangeable with ‘digital-assets’.
2 [2024] EWHC 2342 (Ch)
3 [2023] EWCA Civ 83
4 [2019] EWCH (Comm) 3556
5 [2023] SGHC 199
6 [2020] 2 NZLR 809
7 [1965] AC 1175
8 [2023] HKCFI 914
9 [2021] FCA 1297
10 [2022] VSC 92; 66 VR 30
11 [2019] NSWSC 1866
12 [2020] NSWSC 245.
13 [2020] FamCA 944
14 [2020] FCCA 832
15 [2024] FCA 953
16 [2024] FCA 822
17 At [51]. Her Honour held likewise with respect to the definitions of financial service, financial product, and financial investment under the Corporations Act 2001 (Cth).
18 [2024] FCA 64
19 At [10]
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