Bitcoin is Property A Look at the Decision in AA v Persons Unknown

"I consider that cryptoassets such as Bitcoin are property", Bryan J concludes in his judgment in AA v Persons Unknown. This throws significant judicial weight behind the notion that cryptoassets can be considered as property. The judgment endorses the view of the UK Jurisdictional Taskforce's (UKJT) Statement released in November 2019 that crypto assets are to be treated in principle as property under English law.

Facts

• A hacker (the First Defendant) managed to infiltrate the IT system of a Canadian Insurance Company.
• The hacker demanded a ransom in the form of Bitcoins, in exchange for the decryption software needed to re-access its data and systems.
• The Insurance Company paid $950,000 in Bitcoins to the hacker and duly, slowly, regained access.
• A tracing investigation revealed that a substantial proportion of the Bitcoins were transferred to a specific wallet or address linked to an exchange known as Bitfinex (operated by the Third and Fourth Defendants).

The key takeaway is that the court granted proprietary injunctions against all defendants, freezing the Bitcoins. Thus Bitcoin and potentially other crypto assets can be classed as property for the purposes of a proprietary injunction. Amongst other things, the Claimant also succeeded in its applications to be anonymised during the proceedings, to protect its identity, and for there to be reporting restrictions, as publication might have caused dissipation of the Bitcoins.

Analysis

Historically, English property law has only recognised two forms of property: a chose in possession or a chose in action. Bryan J agrees with the UKJT's Statement in that Cryptoassets do not fall into either, but that doesn't necessarily preclude them being treated as property.

Over time, the case law has softened to the idea that property can exist outside of these two categories. In particular, the judgment refers to the Statement's analysis of The Colonial Bank case. Here, the reasoning suggests that choses in action could be extended to all intangible property. The Statement advocates this approach as typifying the "ability of the common law to stretch traditional definitions and concepts to adapt to new business practices".

Conclusion

Bryan J's judgment provides much needed clarity on the status of Bitcoin, which has been unclear for some time. It is also interesting to see the amount of weight given by the Judge to the UKJT's Statement on crypto assets. The effects of his clear judgment could be profound. To begin with, it means that individuals and businesses subject to similar attacks may in principle be able to obtain an injunction freezing stolen crypto assets, given that Bitcoin can now be classified as property under English law.  Orders may also be made for the relevant exchange to identify the account holders.  This follows other recent decisions where the court has granted a worldwide freezing order and an asset freezing order over stolen cryptocurrencies.

The decision may also assist with the development of regulation by the FCA on crypto assets given the clarity provided by the courts. It could even lead to more confidence in cryptocurrencies and wider adoption.