The legal status of cryptocurrency in English law is cryptic no more!

11 March 2020

A recent English High Court judgment has provided much needed legal certainty in respect of the status of cryptocurrency as property in English law.

Background

In September 2018 (although only reported in November 2019), the High Court granted a freezing order over Bitcoin and Ethereum held by a trading platform (Elena Vorotyntseva v Money-4 Service Limited t/a Nebeus.com and others). This decision was followed in July 2019 when the High Court made its first asset preservation order over Bitcoin held in an account on a cryptocurrency platform (Robertson v Persons Unknown). While both cases were interlocutory decisions, they provided some degree of reassurance of the courts’ willingness to deal with cryptocurrency as property. The orders and legal tests considered in the cases were different but on both occasions the court proceeded on the basis that cryptocurrency could be personal property.

However, in neither case did the English courts directly confront the question of whether cryptocurrency constitutes property under English law. Cryptocurrency is virtual, not tangible, cannot be possessed and does not embody any right capable of being enforced by action. It therefore does not precisely fit either of the two definitions of property in the legal sense (those being ‘chose in possession’ and ‘chose in action’). In November 2019 the UK Jurisdiction Taskforce (UKJT) of the Lawtech Delivery Panel published a legal statement recognising crypto assets as “tradable property”.

The legal statement gave greater reassurance to the financial services market in respect of the status of cryptocurrency in English law. But it was made clear in the statement’s foreword that it was not a statement of the law so the position remained, in a legal sense, ambiguous and open to doubt.

High Court endorsement and legal certainty

The High Court has now endorsed the UKJT’s legal statement, concluding that cryptocurrency is a form of property (and so capable of being the subject of a proprietary injunction). In AA v Persons Unknown [2019] EWHC 3556 (Comm) Bryan J considered the analysis of the UKJT’s “detailed and careful consideration” as to the proprietary status of cryptocurrencies set out in the legal statement and found the analysis to be “compelling.” The court adopted the analysis therein notwithstanding the non-legally binding nature of the statement.

In reaching the conclusion that cryptocurrency is property under English law, Bryan J determined (a) it was fallacious to proceed on the basis English law recognises no forms of property other than choses in possession and choses in action (in reliance on the reasons identified in the legal statement); and (b) cryptocurrency meets the four criteria in the definition of property set out by Lord Wilberforce in National Provincial Bank v Ainsworth [1965] 1 AC 117, namely, (i) definable; (ii) identified by third parties; (iii) capable in their nature if assumption by third parties; and (iv) having some degree of permanence (as concluded by the Singapore International Commercial Court in B2C2 Limited v Quoine PTC Limited [2019] SGHC (I) 03).

Bryan J’s judgment therefore cements the status of cryptocurrency as property in English law and fortifies market confidence in the use of cryptocurrency in the UK. This case is also another example of the English courts’ flexible approach to novel issues.

[1] [2018] EWHC 2596 (Ch)

[1] [2019] EWHC 3556 (Comm)

Nadia Osborne Author
Nadia Osborne
Senior Associate
About the author

Categories