In a pivotal decision for cryptocurrency law, Justice Attiwill of the Supreme Court of Victoria ruled in Re Blockchain Tech Pty Ltd [2024] VSC 690 that Bitcoin satisfies the criteria for property under common law. This landmark case firmly establishes Bitcoin as an intangible asset with proprietary rights, aligning Australian jurisprudence with other common law jurisdictions such as the UK, New Zealand, and Singapore. This article delves into the court's reasoning, the implications of the ruling, and its potential impact on the legal landscape for cryptocurrencies.
Case Background
The plaintiffs in Re Blockchain Tech Pty Ltd alleged that 36 Bitcoin—valued at over AUD 5 million—were transferred to the first defendant under bailment, entitling Blockchain Tech Pty Ltd to immediate possession. They further alleged that an additional 25 Bitcoin, transferred to an exchange for operational purposes, were held on trust by the defendant, who had failed to fully account for their use, with some allegedly misappropriated for personal expenses.
The court was required to determine whether Bitcoin constituted property under Australian common law and, if so, whether equitable relief could be granted.
The Property Question: Application of the Ainsworth Test
Justice Attiwill applied the classical definition of property outlined in National Provincial Bank Ltd v Ainsworth [1965] AC 1175. Under the Ainsworth test, for an asset to qualify as property, it must be:
Identifiable by subject matter
Identifiable by third parties
Capable of assumption by third parties
Possessing some degree of permanence or stability
Bitcoin satisfied all four criteria.
1. Identifiable by Subject Matter
Bitcoin, as defined by Justice Attiwill, is “an electronic coin” identifiable through its existence on a blockchain network. Each Bitcoin is associated with a unique digital address on a distributed ledger, making it distinct and recognisable.
2. Identifiable by Third Parties
Ownership and control of Bitcoin are established through public and private key infrastructure, allowing third parties to identify rightful owners. The court emphasised that a Bitcoin owner can exclude others from dealing with their Bitcoin, reinforcing its identifiable nature.
3. Capable of Assumption by Third Parties
Bitcoin's transferability between parties demonstrates its capacity for assumption by third parties. The ability to assign or transfer an interest in Bitcoin without altering its inherent characteristics was pivotal in meeting this criterion.
4. Possessing Permanence or Stability
Bitcoin's permanence is derived from its immutable record on the blockchain. As Justice Attiwill noted, the shared public ledger contains the “entire life history of a cryptocoin,” providing stability despite the intangible nature of the asset.
Bitcoin as Intangible Property: The Court's Rationale
Justice Attiwill held that Bitcoin is intangible property, specifically a chose in action. This classification was supported by the court’s observation that:
Bitcoin cannot be physically possessed due to its intangible nature.
Bitcoin transactions do not involve physical transfer but rather alterations in the ledger balances at digital addresses.
While Bitcoin’s status as a chose in possession was dismissed, its classification as a chose in action aligns with established Australian jurisprudence that recognises rights lacking tangible manifestation (CGU Insurance Limited v Blakeley [2016] HCA 2).
Justice Attiwill rejected the recommendation of the UK Law Commission for a third category of personal property (termed "data objects") to accommodate cryptocurrencies. Instead, the court maintained that existing legal frameworks could sufficiently encompass Bitcoin without redefining property law.
Trusts and Bailment
Bitcoin as Trust Property
The court held that the 25 Bitcoin transferred to the defendant were held on trust. Blockchain Tech Pty Ltd was entitled to equitable compensation for the misappropriated Bitcoin, as the trustee had failed to account for their dissipation. However, the trustee's obligation extended only to the value of Bitcoin at the time of the transaction, not their present value—a distinction critical for future trust disputes involving volatile digital assets.
Bitcoin and Bailment
While Bitcoin was recognised as property, the court held that it could not be subject to bailment due to its intangible nature. Bailment requires possession of tangible goods, a condition Bitcoin does not fulfill.
International Precedents and Comparative Analysis
Justice Attiwill’s judgment drew extensively from international jurisprudence, including:
England and Wales: AA v Persons Unknown [2019] EWHC 3556 (Comm) recognised cryptocurrencies as property under common law, satisfying the Ainsworth criteria.
New Zealand: In Ruscoe v Cryptopia Ltd (in liq) [2020] 2 NSLR 809, cryptocurrencies were deemed property capable of being held on trust.
Hong Kong: Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 2 affirmed the proprietary status of cryptocurrencies in equity.
These cases, alongside academic commentary and draft legislation from the UK Law Commission, informed the court’s reasoning and bolstered its conclusion.
Implications for Cryptocurrency Law
The recognition of Bitcoin as property under Australian law has profound implications:
Expanded Legal Remedies
Victims of cryptocurrency theft or misappropriation can pursue proprietary remedies, such as tracing and equitable compensation.
Custodial Obligations
Third-party custodians of cryptocurrencies must ensure robust compliance with trust obligations, as failure to account for assets could result in equitable claims.
Asset Protection
Bitcoin holders gain increased legal certainty, enhancing its attractiveness as a store of value and investment.
Framework for Other Cryptocurrencies
The decision sets a precedent for recognising other digital assets as property, fostering innovation and legal clarity in the blockchain ecosystem. We note this decision referred specifically to Bitcoin.
Future Directions
While Re Blockchain Tech Pty Ltd establishes a strong foundation for cryptocurrency jurisprudence, questions remain. Appeals may further refine the classification of Bitcoin and address unresolved issues, such as:
Whether a third category of personal property is necessary for digital assets.
The treatment of decentralised assets beyond Bitcoin.
The extent to which traditional legal principles can accommodate emerging blockchain technologies.
Conclusion
The Supreme Court of Victoria’s recognition of Bitcoin as property marks a transformative moment for cryptocurrency law in Australia. By grounding its analysis in established legal principles and drawing from international precedents, the court has provided a robust framework for future cases involving digital assets. This decision not only clarifies the rights of Bitcoin holders but also reinforces Australia's position as a leader in integrating blockchain technology into its legal system.
For practitioners and stakeholders, this case underscores the importance of understanding the intersection of property law and digital assets—a dynamic area poised for continued evolution.
Citations:
Re Blockchain Tech Pty Ltd [2024] VSC 690.
National Provincial Bank Ltd v Ainsworth [1965] AC 1175.
Ruscoe v Cryptopia Ltd (in liq) [2020] 2 NSLR 809.
CGU Insurance Limited v Blakeley [2016] HCA 2.
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