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Cryptocurrency – Is It Property? (Part III)

In this series of articles, we discuss the legal status of cryptocurrency under English law. Previously, we covered the recent decision in Robertson v Persons Unknown [2019] in which the High Court imposed an Asset Preservation Order over Bitcoins, on the basis that there was a serious issue to be tried over whether they were the Claimant’s personal property and, therefore, subject to a trust.

UKJT Legal Statement

Further clarity has now been provided in the form of a Legal Statement, released this month, by the UK Jurisdiction Taskforce (UKJT) of the LawTech Delivery Panel (chaired by the Chancellor of the High Court, Sir Geoffrey Vos). The UKJT has declared that cryptocurrency can, in principle, be treated as property. Although the Legal Statement does not bind the Courts, it is likely to influence their future approach. The Legal Statement does not, however, cover several important issues affecting cryptocurrency such as data protection, intellectual property rights and anti-money laundering. As such, there remains a need for further legal clarity.

Key points

The question of whether cryptocurrency is property is, to some degree, dependent on the circumstances, including the characteristics of the cryptocurrency in question, the rules of the system in which it exists and the purpose for which the question is being asked.

Notwithstanding, the general position is as follows:

  1. Cryptocurrency has all the characteristics of property (relying on the definition of property in Lord Wilberforce’s seminal judgment in National Provincial Bank v Ainsworth [1965] AC 1175 which held that rights and interests can only be considered property if they are “definable, identifiable by third parties, capable in their nature of assumption by third parties, and have some degree or permanence or stability”). This is in line with the High Court’s approach in Robertson.
  2. Novel or distinctive features that many forms of cryptocurrency have (such as intangibility, cryptographic authentication, use of distributed transaction ledgers, decentralisation and rule by consensus) do not of themselves disqualify them from being property.
  3. Further, cryptocurrency is not disqualified from being property because it is pure information and does not easily conform to the traditional English property classifications of things in possession and things in action. Things in possession are tangible objects, whereas things in action are rights that can be enforced by litigation, such as debts or contractual obligations. In relation to the former, the UKJT noted that, in contrast to other digital assets, cryptocurrency has no inherent worth and derives its commercial value from the fact that owners are able to effect and authenticate dealings in accordance with the rules of the system. As to the latter point, the UKJT placed reliance on Armstrong v Winnington [2012] EWHC 10 (Ch) in which it was held that an EU carbon emissions allowance was a form of “intangible property” notwithstanding that it was neither a thing in possession nor a thing in action.

Commentary

The Legal Statement is a welcome indication that the English legal system has the adaptability to address the complex and novel legal points that arise in relation to cryptocurrency. The acknowledgement - from a senior member of the judiciary and leading experts in the field - that cryptocurrency is property will provide reassurance and certainty to investors in this asset class. It also increases the attractiveness of the jurisdiction to claimants who can be confident that the English courts will, subject to the specific circumstances, be prepared to assist them with the recovery of stolen cryptocurrency.

However, as the UKJT has acknowledged, the Legal Statement is not a comprehensive statement of the law in this area. Indeed, Sir Geoffrey Vos has suggested that the next step is for the Law Commission to consider whether legislation is desirable in order to plug the many gaps that still exist.

Related Lawyers: Duran Ross
Related Practice Areas: Commercial Disputes

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