An Australian court has held that bitcoin is personal property, in a way that highlights our concern that the Law Commission's Property (Digital Assets etc) Bill (the Bill), presently going through Parliament, will create an unhelpful "fork" in the international legal treatment of cryptoassets.
Attiwill J, sitting in the Supreme Court of Victoria, gave judgment on 12 November 2024 in the case of Re Blockchain Tech Pty Ltd (Re Blockchain), holding (among various other things) that bitcoin is personal property under Australian law.
Even more importantly, the judge, in reaching his conclusion, rejected the personal property taxonomy for cryptoassets advocated by the Law Commission of England and Wales through the Bill and its related reports. He did this by applying long-standing principles of the common law established by a decision of a strong Australian High Court, which was not considered by the Law Commission or by the deputy judge in the recent English case of D'Aloia v Persons Unknown and Others (D'Aloia).
Re Blockchain is in line with the common law positions in Singapore and New Zealand.
We vigorously support the need for certainty that crypto-tokens and other relevant digital assets are personal property as a matter of English law – that is critical to unleash the potential of the UK's digital assets markets. However, we are equally firm in our view that the conceptual approach taken in Re Blockchain demonstrates that:
In this briefing we outline Attiwill J's decision, and explain how the law of England and Wales is at risk of being forced into a wrong turn in this field – one that is unnecessary and easily avoided.
For current purposes, the facts in the case are far less important than the result. While the disputes, misunderstandings and accusations between the parties gave rise to enough issues for the judge to fill an entire law exam, it need only be understood as a dispute about the ownership and handling of an amount of bitcoin.
The key question the learned judge had to answer, therefore, was whether the common law as applied in Australia should recognise bitcoin as personal property.
As we have explained in a previous briefing, there is now an increasing number of cases, across a range of common law jurisdictions, that have had to deal with this question. In broad terms (and as the Law Commission recognised in its Final Report), there is an emerging and deep consensus that crypto-tokens and similar digital assets are capable of being the objects of personal property rights.
However, the way in which judges reach that answer has not been wholly consistent. Specifically, they have had to grapple with the long-held principle that the common law recognises only two types of personal property:
This has required a decision to be made as to which of these categories relevant digital assets belong or whether a new "third category" of personal property should now be recognised to accommodate them. As intangible property that are not capable of being possessed, digital assets cannot be things in possession (as expressly recognised by Attiwill J).
Some judges have described their struggle to recognise crypto-tokens as things in action, because of a view that this can only refer to rights enforceable against a person or persons by legal action or proceedings – a limited conception of a "thing in action" that does not generally apply to crypto-tokens. In some cases, the judges (especially at interlocutory stages) have largely avoided reaching a view on the issue. The Law Commission has, however, thrown its weight behind the "third category" approach.
Re Blockchain is exceptionally helpful in its review and approval of the relevant cases and academic commentaries across Singapore, New Zealand, and England and Wales, as well as Australia. After doing so, it reaches a decisive conclusion (our emphasis added):
"As a result, I find that a person’s interest in Bitcoin is property. It is not a chose in possession as it is intangible. It cannot be possessed. It is a chose in action. As I have already said, it is well established in Australia that a chose in action comprises a heterogeneous group of rights which have only one common characteristic in that they do not confer the present possession of a tangible object. That is the case with Bitcoin."
Aligning Australian jurisprudence to that of Singapore and New Zealand, Attiwill J has concluded that bitcoin is capable of being personal property, and it is so because it is a thing in action.
We are unsurprised by this conclusion.
Apart from its consistency with the Singapore and New Zealand positions, another distinguished Australian judge in the digital assets space, Jackman J, has made two important interventions in the debate in 2024. He delivered a speech in June 2024 entitled 'Is Cryptocurrency Property?', in which he also surveyed the common law cases, as well as academic and juristic commentaries (including those under English law). He returned to the topic in his United Nations Day Lecture in October 2024, 'What Has Taxonomy Ever Done for Us?'
Directly considering the Bill, he very firmly reached the same conclusion as Re Blockchain and expressed the view:
"[T]he bill seeks to impose on the common law what I will seek to show is a misconception as to the nature of choses in action which, if it is enacted, will stultify the proper development of the common law. In short, the proposal is based on a remarkably ill-informed understanding of the common law in this area."
Importantly, he grounded his conclusion in what he referred to as Cain's Case, a 1954 decision of the High Court of Australia (Australia's highest court), which (as he compellingly outlined) is already binding authority for the proposition that things in action are not limited to rights which can only be enforced in legal proceedings.
Once that principle is accepted, two consequences follow entirely naturally:
Our earlier briefing described our concerns about the Law Commission's approach, under which the Bill would recognise a "third category". Jackman J puts his view in trenchant terms in his speech: "[T]here is no need in Australia to resort to a third category…We should always conserve good things when worse things are proposed to be put in their place."
Once one accepts the flexibility under the common law of the category of things in action and its adaptability to apply to all intangible assets including crypto-tokens, the need for a third category falls away. This is why we have proposed amendments to the Bill, which will deliver certainty that digital assets can be personal property, but in a way that is consistent with the flexibility the common law already has as one of its great strengths.
Our major concern is that the mere statutory creation/recognition of a third category of personal property, without more, actually raises many more additional questions and uncertainty for the market.
Two obvious questions are:
Answering these questions would take considerable time, and will depend on the emergence of appropriate cases to operate as the relevant vehicles.
This means that the Bill is not as helpful as some of its supporters argue. More significantly, the time, uncertainty and cost involved in the establishment of an entirely new body of rules, principles and remedies by the English courts to cater for digital assets as a "third category" of personal property is – at the very minimum – not at all conducive to making the UK a hub for a thriving digital assets ecosystem, and may drive investment, innovation and talent to other jurisdictions.
D'Aloia is an important decision. Unlike many of the English law cases to date on the status of crypto-tokens as a matter of English personal property law, it is not a mere interim hearing. It is a fully-reasoned judgment (in this case, about Tether's stablecoin, USDT) given at trial and after hearing oral evidence.
It was, therefore, quite widely welcomed within the digital assets community.
However, when looking at remedies, disappointingly, the deputy judge in D'Aloia treated USDT as in effect not fungible.
We think that this may be a reflection of some low-quality evidence before the court, but given that issuers and holders want stablecoins to operate like fiat currency, this requires fungibility (when a person pays a £10 note into a bank account, they do not expect or need that £10 note back).
Connected to that point, the deputy judge expressly leaned on the Law Commission's analysis that cryptoassets are 'quasi-tangible' in deciding that USDT, as neither a thing in possession nor a thing in action, probably fell within the third category of personal property advocated by the Law Commission. This neatly encapsulates our concern that – even before it has been passed – the Law Commission's thinking is beginning to infuse its way into the English common law.
Overall, we therefore welcome the recognition of personal property rights over USDT in D'Aloia, but, for the same reasons we are concerned about the Bill, we think it must be incorrect (particularly the obiter finding that stablecoins are not fungible). We hope and believe that it does not set a definitive precedent in its analysis of the taxonomy, as that would be a very bad result for the digital assets industry in the UK.
This is not merely an academic issue.
The "third category" approach potentially introduces real risks and issues for the industry, and it is absolutely critical that the Bill delivers the benefits the sector needs.
The Law Commission did not have the benefit of Jackman J's discussion of Cain's Case, let alone the decision of the Supreme Court of Victoria in Re Blockchain, when it carried out its extremely significant and in-depth review of the common law approach to digital assets.
Parliament, however, is now well-placed to consider these crucial developments.
We have drafted, and proposed to the House of Lords Public Special Bill Committee considering the Bill, amendments that will preserve the policy ambition to remove legal uncertainty as to the status of crypto-tokens and other relevant digital assets as personal property (and, therefore, remove risk and reduce cost), while also retaining the common law's ability to evolve in a commercial and flexible way.
We know from many discussions that a number of clients, trade associations, other lawyers and academics share our concerns, and are therefore hopeful that Parliament will listen to the concerns rather than assume that the Law Commission's approach is uncontroversial. Indeed, from the oral evidence given to the Lords, and the written submissions already published, we can see there are other strong voices raising some of the issues identified in this briefing.
We strongly recommend that digital assets businesses engage urgently with the detail of the Bill, and specifically the House of Lords Call for Evidence.
Legislators are open to hearing about the dangers in the "third category" approach, but the most powerful arguments will come from those at the cutting edge of the sector.
Travers Smith can help you with this and many other issues affecting digital assets firms.
