Background
The Supreme Court of Victoria, in Blockchain Tech Pty Ltd [2024] VSC 690, has established that Bitcoin qualifies as property under Australian law. This case marks a significant milestone, aligning Australia with other common law jurisdictions such as the UK, New Zealand, and Singapore, which have recognised cryptocurrencies as property. We discuss the key UK decision that confirms cryptocurrency is property in our previous article.
The case arose when Blockchain Tech Pty Ltd claimed that 36 Bitcoin, valued at more than AU$5 million, had been transferred to the first defendant under a bailment agreement. The plaintiffs sought immediate possession of these assets, asserting that an additional 25 Bitcoin had been transferred to an exchange for working capital but were misappropriated by the defendant.
In a landmark decision, the High Court of Australia (HCA) has allowed an appeal, resulting in a dismissed employee being awarded $1.44 million in damages for lost earnings and pain and suffering after being diagnosed with a psychiatric injury resulting from his employer breaching his employment contract.
Key findings
Justice Attiwill referred to many cases, recent and historical, concerning how to identify property and any discussion on cryptocurrency as property. As discussed in our previous article, in July 2024 the Australian Federal Court endorsed that cryptocurrency was property for the purpose of an interlocutory application. This case was used as a basis for this decision.
Justice Attiwill's ruling hinged on the Ainsworth test. The Ainsworth test is a legal framework used to determine whether a particular asset qualifies as property under common law, and was established in Ainsworth v Criminal Justice Commission (1992).
The test defines property based on four criteria, which were applied to Bitcoin as follows:
Identifiability: Bitcoin can be identified by its unique public key on the blockchain. Justice Attiwill said that ‘an interest in Bitcoin is identifiable but not the identity of the person who has the interest’.
Third-party recognition: The ownership of Bitcoin is publicly verifiable on the shared ledger. A person has the power to control and deal with the Bitcoin and to exclude third parties from accessing or dealing with it.
Permanence: Bitcoin exists at a specific digital address until a transaction occurs. As explained by Justice Attiwill, ‘Upon a transaction concerning Bitcoin, the number of Bitcoin at the owner’s address is reduced and the number of Bitcoin at the next owner’s address is increased. This process involves the owner of the Bitcoin (the transferor) using their private key to digitally sign a hash which records the details of the transaction’.
Alienability: While Bitcoin transactions do not involve the physical transfer of the asset, this does not negate its status as property. This is because alienability is not an indispensable attribute of property.
Justice Attiwill also raised a fifth test element: an individual's interest in Bitcoin is distinct from mere information. This distinction arises because owning Bitcoin includes the ability to transact using a public and private key, and to prevent third parties from accessing or dealing with it.
Justice Attiwill emphasised that Bitcoin, as an intangible asset, is classified as a chose in action; a right to a benefit that does not confer immediate possession of a tangible object.
Implications of the ruling
This decision not only clarifies the legal status of Bitcoin but also expands the potential remedies available for recovering misappropriated cryptocurrencies. By recognising Bitcoin as property, the court enhances the rights of holders and sets a precedent for similar recognition of other cryptocurrencies.
Recognising cryptocurrencies as property boosts confidence among institutional investors and financial institutions. This ruling enhances legal protections for cryptocurrency holders and is likely to influence regulatory developments.
As the landscape of cryptocurrency continues to evolve, this decision will likely serve as a foundational reference for courts and lawmakers alike.