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To bitcoin or not to bitcoin: property, jurisdiction and a step closer to global regulation?

Posted: 28/01/2020

The question of whether cryptocurrencies can be considered as ‘property’ has been long debated in the legal world, both in England and beyond. Lord Wilberforce helpfully summarised the characteristics of property in National Provincial Bank v Ainsworth [1]: ‘… it must be definable, identifiable by third parties, capable in its nature of assumption by third parties and have some degree of permanence or stability’. Whether a cryptocurrency is defined as property can have a real impact on how the asset can be dealt with, whether it can be secured or charged, and – perhaps most importantly for present purposes – whether and how it can be seized or frozen for the purposes of enforcement.

Last year, the Singapore International Commercial Court recognised that cryptocurrencies can be considered as property capable of being held on trust in B2C2 Ltd v Quoine Pte Ltd [2]. While the English courts had previously treated cryptocurrencies as property, the authorities did not analyse the issue in any depth. By way of example, in Liam David Robertson v Persons Unknown & Ors [3], Moulder J granted an asset preservation order and a Bankers Trust order over bitcoin. In Vorotyntseva v Money-4 Limited t/a [4], Birss J granted a freezing order over bitcoin and ether. Importantly, neither party had argued that cryptocurrency could not be a form of property. These judgments were considered in the recent Legal Statement on the Status of Cryptoassets and Smart Contracts by the UK Jurisdictional Taskforce (UKJT), which concluded that crypto assets might not be classifiable as ‘things in possession’ or ‘things in action’, but can be treated as ‘another, third, kind of property’.

Most recently, in the important case for English insurers of AA v Persons Unknown and others [5], the English High Court considered the analysis in the UKJT as ‘compelling’ and granted an interim proprietary injunction in respect of a bitcoin ransom payment. The case arose following the computer hacking and encryption of a Canadian insurance company’s customer systems. Following the attack, the Canadian company, which was insured by an English insurer, was subject to a ransomware demand that to get its data back, it had to pay for a decryption tool in the amount of $1,200,000 in bitcoins. In light of the importance of the systems that had been encrypted, the English insurer agreed to pay $950,000 in ransom for the tool. The sum was paid in bitcoins. Following the payment and the recovery of the systems, investigations were carried out which tracked the bitcoins that had been transferred. The English insurer applied for a proprietary injunction over the bitcoins in order to recover the ransom payment.

In private and anonymous

At the outset of the hearing, Bryan J granted an application for the hearing to be held in private and for the English insurer to be anonymised. The reporting restrictions were lifted once the injunction had been secured and served on the first two defendants. Both of these measures were necessary on the basis that publicity in this case would defeat the object of the hearing by potentially tipping off the persons unknown and enabling them to dissipate the bitcoins, as well as the risk of further retaliatory cyber revenge or copycat attacks.

Proprietary injunction over bitcoin

Most prominently, the judge had to consider a proprietary injunction application over the bitcoins. In so doing, Bryan J considered the UKJT legal statement in some detail. He recognised (as did the UKJT, which is chaired by Sir Geoffrey Vos) that there were some difficulties in treating cryptocurrencies as property, based on the premise that traditional English law does not generally recognise forms of property other than choses in possession and choses in action, neither of which fits in neatly with the novel characteristics of cryptocurrencies. Nonetheless, he accepted the reasons stated in the UKJT legal statement by concluding that crypto assets, such as bitcoin, are property.

Having reached this conclusion, Bryan J then considered the applicable principles in relation to a proprietary injunction, as follows:

  • when property is obtained by fraud, equity imposes a constructive trust on the fraudulent recipient and the property is recoverable and traceable in equity [6];
  • the American Cyanamid principles apply to a proprietary injunction, namely: (i) there must be a serious issue to be tried, (ii) if there is a serious issue to be tried, the court must consider whether the balance of convenience lies in granting the relief sought [7]. The latter involves a consideration of the ‘efficacy of damages as an adequate remedy, the adequacy of the cross-undertaking as to damages, and the overall balance of convenience, including the merits of the proposed claim’ [8].

Applying these principles, Bryan J was able to grant the interim proprietary injunction concluding that: (i) cryptocurrencies are a form of property capable of being the subject of a proprietary injunction; (ii) there was at least a serious issue to be tried against all four defendants; (iii) damages were not an adequate remedy where the bitcoins could be dissipated and the English insurer has a strong claim over them; and (iv) the balance of convenience justified granting the relief.

Bryan J also granted permission for the claimant to serve the claim form outside the jurisdiction, as well as alternative service to allow the claimant to serve the third and fourth defendants by email (due to the exceptional circumstances surrounding the potential ease of dissipation of the bitcoins).


The law surrounding cryptocurrencies continues to develop with the advancement of the blockchain / DLT technology, which underpins cryptocurrencies, and while those on the dark web continue to seek to exploit the opportunities that this relatively new technology provides.

This is the first reported judicial consideration of the UKJT’s analysis of crypto assets (which was otherwise a non-binding statement) and provides some further legal certainty over the classification of crypto assets. Classifying crypto assets as property has far-reaching implications: (i) it allows the law to recognise the legal rights of cryptocurrency investors, (ii) it allows crypto assets to sit more comfortably within the existing legal framework on property, which governs how they can be owned, used and transferred, as well as whether they would form part of insolvency/bankruptcy procedures, and (iii) it allows courts to impose freezing and proprietary injunctions over them in cases of cyber-attacks and theft.

The decision is also particularly important for English cyber insurers as it provides increased confidence in the ability to recover ransom payments (which are usually covered under cyber policies) made in a form of cryptocurrency on behalf of their insureds to cyber criminals.

With the cryptocurrency market continuing to grow exponentially, this increased legal certainty will likely provide increased market confidence. It remains to be seen whether the all-important questions of the status and regulation of cryptocurrencies will become subject to any future domestic or international legislation. As a potential step closer to a global regulatory system, the World Economic Forum has recently launched a global consortium for digital currency governance. The consortium brings together firms, financial institutions, governments, technical experts and NGOs in order to design a set of principles governing digital currencies.  

[1] [1965] 1 AC 1175

[2] [2019] SGHC (I) 03

[3] (unreported), 16 July 2019

[4] [2018] EWHC 2596 (Ch)

[5] [2019] EWHC 3556 (Comm)

[6] Westdeutsche Landesbank v Islington LBC [1996] AC 669

[7] Poly Peck International PLC v Nadir (No.2) [1992] 4 All ER 769

[8] AA v Persons Unknown and others [2019] EWHC 3556 (Comm) at [62]

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