In January 2020, the Commercial Court held in AA v. Person Unknown  EWHC 2556 (Comm) that a cryptocurrency such as bitcoin is a form of property capable of forming the subject of a proprietary injunction. This is the first time the courts have applied the analysis set out in the UK Jurisdiction Taskforce’s legal statement on cryptoassets and smart contracts to a cryptocurrency.
This decision is a start and brings some welcome clarity regarding the status of cryptocurrencies as a form of property. However, the next frontier may require the courts to confront tricky legal issues resulting from the transnational nature of cryptocurrencies, such as jurisdiction, governing law and the legal position of currency exchanges. Resolution of these points may depend on the continuation of the approach from AA in terms of the adaption of existing legal principle to new technology.
Bitcoin as property
In the case of AA1, bitcoin was paid by an English insurer, the insurer of a Canadian insurance company, as a ransom, in return for decryption software following a malware encryption cyberattack.
The insurer hired consultants who tracked the bitcoin payments to a specific address linked to the cryptocurrency exchange Bitfinex. As 96 bitcoins remained in the located account, the insurer sought an interim proprietary injunction to secure the bitcoins as the insurer’s property.
The court had to consider whether the cryptocurrency constituted a form of property capable of forming the subject matter of an injunction. The difficulty for the judge (Bryan J) was that traditionally English case law identifies property as either a ‘thing in possession’ or a ‘thing in action’. Cryptocurrencies cannot be ‘things in possession’, as they are intangible and cannot be possessed due to their virtual nature. They, additionally, cannot be defined as ‘things in action’ as they do not embody any right capable of being enforced by action.
However, Bryan J was able to rely on the thoughtful analysis of the UK Jurisdiction Taskforce’s recent legal statement2 and adopted its pragmatic and sensible conclusion that while a cryptocurrency might not be a ‘thing in action’, that did not mean it could not be treated as property. He concluded on a preliminary basis that a cryptocurrency would meet the four classic criteria for property set out by Lord Wilberforce in National Provincial Bank v. Ainsworth,3 namely, that it was (i) definable; (ii) identifiable by third parties; (iii) capable by its nature of assumption by third parties; and (iv) capable of some degree of permanence.
Therefore, Bryan J was satisfied that, at least for purposes of an application for interim relief, bitcoin constituted property and was capable of being the subject of a proprietary injunction. The English courts deliberated on this issue previously in two cases4 but not in such a considered way and with the benefit of the taskforce’s conclusions. The approach of Bryan J is significant, not just for the result but also for the manner in which he adapted existing legal rules to new technology and was prepared to take guidance from the taskforce’s conclusions.