Wednesday, 19 February 2020
Sovrano

Are Cryptoassets “Property” For The Purposes Of English Law?

We are one step closer to the answer to this tricky question following the decision of Bryan J in the High Court in the recent case of AA v Persons Unknown who demanded Bitcoin on the 10th and 11th October 2019 and others {2019] EWHC 3556 (Comm).

What are cryptoassets?

Cryptoassets are digital representations of value which can be transferred, stored and/or digitally traded.

In very basic terms, ownership of cryptocurrency amounts to ownership of a cryptographic address which is accessed using a key.

Case background

The facts of this case were that an insurer had paid a Bitcoin ransom to a specified account on behalf of its insured to allow the insured to regain access to its hacked systems which had been infected by malware.

The insurer then brought proceedings to seek to trace and recover the Bitcoins. Some of the Bitcoins had already been converted to fiat currency (finances whose value is supported by the Government that issued it) but the majority had been transferred to an address that was linked to a cryptocurrency exchange, called Bitfinex.

The insurers pleaded various proprietary claims and sought interim relief against Bitfinex and the unknown persons who owned the relevant address seeking to prevent them from transferring or using the remaining Bitcoins and seeking to compel Bitfinex to provide details of the individuals. The Court therefore had to consider whether Bitcoins fulfilled the definition of “property” for the purposes of English law.

Court ruling

Bryan J acknowledged that cryptoassets did not necessarily fulfil the traditional definition of “property” but he said that did not mean that a cryptoasset could not be treated as property.

He referred to the definition set out by Lord Wilberforce in National Provisional Bank v Ainsworth [1965] 1AC 1175 which said that property had to be:

- Definable
- Identifiable by third parties
- Capable of being transferred to third parties; and
- Have a certain degree of permanence.

He also commented on the “compelling” nature of the LawTech Delivery Panel’s “Legal Statement on the Status of Cryptoassets and Smart Contracts (Nov 2019)” which considered the issue in detail. Bryan J said that he was satisfied – at least for the purposes of the level required for granting interim relief – that Bitcoins constituted “property”.

Comment

To many this will seem to be a sensible and potentially welcome development in the legal framework around cryptoassets.

However, it remains to be seen whether the Courts uphold this view when the issues are fully explored at trial and the effect that any such decision may have on the viability of cryptoassets.


source: nelsonsla.co.uk

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