Cryptocurrency is a form of virtual money stored in a “digital wallet” that does not physically exist. Some of the more well-known cryptocurrencies are bitcoin, ethereum and ripple. They are digital tokens created from code. The currencies are not regulated and are not considered a form of legal tender.
Recently, the New Zealand High Court had to consider whether cryptocurrency amounted to “property” in an insolvency context in Ruscoe & Moore v Cryptopia Limited (in liquidation) [2020][1]. The judgement is likely to be instructive to Australian Courts.
The NZ High Court referred to the House of Lords decision National Provincial Bank Ltd v Ainsworth [1965] where Lord Wilberforce noted that property has four criteria:
- It is definable;
- It is identifiable by third parties;
- It is capable in its nature of assumption by third parties; and
- It has some degree of permanence or stability.
The Court held that cryptocurrencies satisfied the criteria set down by the House of Lords based on three interdependent features: there is a public key recording the unit of currency, ownership is by way of a private key attached to the corresponding public key and a fresh private key is generated upon a transfer of the relevant ‘coin’.
The Court dismissed two arguments that cryptocurrency was not property. The first argument was that the common law only recognised two forms of personal property: tangibles and choses in action and as cryptocurrency was neither, did not amount to personal property. The second argument was that cryptocurrency was just a form information and information is not generally recognised as property. That argument was rejected as being ‘simplistic’ and wrong. The court was satisfied that the currency was more than just digitally recorded information. However, even if the currency did constitute information, amongst other things, it was not disqualified from being property.
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[1] NZHC 728
