Is Cryptocurrency Property?

Commercial Law Association

The question whether cryptocurrency is property raises some fundamentally important issues of legal principle: Can cryptocurrency be treated as a chose in action, and what follows if it cannot? Is cryptocurrency properly treated as merely information and therefore not property? Can cryptocurrency be held on trust, for example through custodial intermediary exchanges and other holding arrangements which give relatively low-cost access to trading? Can one grant a mortgage or charge over it? Are the policy questions too great to be left to courts applying the common law? As yet, these issues have not yet arisen in substantive proceedings in Australia, although cryptocurrency was in effect assumed to be property in the two cases which might have analysed the issue (Commissioner of the Australian Federal Police v Bigatton [2020] NSWSC 245 (Cavanagh J); Chen v Blockchain Global Limited (2022) 66 VR 30 (Attiwill J)). Much of the judicial reasoning in other jurisdictions over the last five years is open to criticism. The legal debate was enlivened last year with the publication of an article by Professor Robert Stevens of Oxford University entitled “Crypto is Not Property” (2023) 139 LQR 615, written in a refreshingly provocative style compared to the typically sober and measured pages of the Law Quarterly Review. But like cricket or rugby matches, the best style is not always victorious. I will seek to show that well-established High Court authority on various aspects of the concept of “property” should yield a clear answer in favour of the view that cryptocurrency is property, and as to the nature of that property. While I accept that cryptocurrency would continue to exist even if the law did not regard it as an object of personal property rights, there would be important consequences for the kinds of transactions which people can, and do, engage in, whether by way of trusts, mortgages and charges, and wills. The question is also central to the availability of legal remedies, such as those associated with tracing or interim remedies such as freezing orders and proprietary injunctions.

Let me begin with a brief outline of cryptocurrency, admittedly at the risk of oversimplification given that there exist thousands of different cryptocurrencies. Many of them carry a great deal of sail and very little ballast. My focus will be on public, permissionless and decentralised systems such as bitcoin and ether. At its simplest, cryptocurrency is created from code, can be used to make payments, and does not exist physically in the form of notes or coins. It is created using blockchain technology, a blockchain being a ledger method for recording transactions. This data is organised in blocks or groups across many computers that are linked and secured, but each block can only hold a certain amount of information, so new blocks are added to the ledger and this forms a chain. Blockchain refers to each block being chained to its predecessor. Each block has its own unique identifier, which is known as a cryptographic hash. The hash protects the information in the block from anyone without the required code and protects the block’s place on the chain from being tampered with.

People interact with blockchain by creating a “wallet”, which acts like a user account. There are many different kinds of wallet, but at its core, a wallet is made of two keys that provide access to the person’s underlying cryptocurrency. First, there is a public key that is an alphanumeric identifier, which functions as an address or location for the user. This is publicly disclosed, for example for the purpose of providing a “destination” for someone to send cryptocurrency to. Second, there is a private key, which is an alphanumeric code that acts as a confidential password and is used to “sign” transactions and prove “ownership” of currency. A private key should not be shared, as holding a private key means having access to the wallet and the underlying cryptocurrency, and confers practical control over the cryptocurrency.

For each network there are devices that undertake “mining”, being the means whereby transactions are validated. The latest transactions are gathered together into a block, which also includes a hash of the previous block. The miners work in competition with each other in their virtual gladiators’ cages to produce an appropriate hash of this new block, and once blocks have been validated in this way they are broadcast to the network and incorporated into further work. They are called “miners” because they are then rewarded with newly mined cryptocurrency as well as rewards offered by other users who wish their transactions to be included in the blockchain (Kelvin Low, (2020) 136 LQR 345).

The digital ledger represents a reliable history of valid dealings in the cryptocurrency, thereby preventing “double-spending”, that is, inconsistent transfers of the same cryptocurrency to different recipients. Typically there is no single person or entity having responsibility for maintaining the ledger or any right to do so. The rules governing dealings are often established by the informal consensus of participants, rather than by contract or in some other legally binding way. The rules tend to be self-enforcing in practice because only transactions made in compliance with them and duly entered in the ledger will be accepted by participants as valid. The report of the United Kingdom Jurisdiction Taskforce entitled “Legal statement on cryptoassets and smart contracts” in November 2019 provided a useful list of the principal novel and characteristic features of cryptoassets (at [31]) as being: intangibility, cryptographic authentication, use of a distributed transaction ledger, decentralisation, and rule by consensus. I will refer to that Legal Statement throughout this paper, but it is worth noting that the UK Jurisdiction Taskforce was chaired by Sir Geoffrey Vos (Chancellor of the High Court and Master of the Rolls) and comprised a distinguished group of legal, commercial and regulatory specialists. One of the important points made by the Taskforce was the rejection of the view that the design of cryptoassets means that there is no need for traditional legal rules or processes: at [41]. As experience over the last five or so years demonstrates, cryptoassets are not outside the law, irrespective of some of the practical obstacles to legal intervention which their design creates: at [41]. For example, rectification of errors in the blockchain ledger by way of court order may be practically impossible because the distributed nature of the ledger, and the fact that the ledger records transactions in blocks rather than individually, would entail enforcement of the order against thousands of users, many of whom would be outside the jurisdiction (see M. Bridge, L. Gullifer, K.F.K. Low and G. McMeel, The Law of Personal Property (3^rd ed, 2022) at [8-056]).

The most detailed judicial analysis of the question whether cryptocurrency is property is that of Gendall J in the High Court of New Zealand in Ruscoe v Cryptopia Limited (in liq) [2020] 2 NZLR 809, which dealt with the question whether cryptocurrency was capable of being held on trust. Gendall J held that the cryptocurrencies in question were a species of intangible personal property which were without question capable of being the subject matter of a trust: [69]. Gendall J referred to Lord Wilberforce’s statement in National Provincial Bank Limited v Ainsworth [1965] AC 1175 at 1248, a case dealing with the so-called “deserted wife’s equity”, which is often cited as the classic statement of the characteristics of “property”, namely:

 

Before a right or an interest can be admitted into the category of property, or of a right affecting property, 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.

Gendall J held that the four criteria in Lord Wilberforce’s statement were clearly met, First, the cryptocurrency was definable, as the public key allocated to a cryptocurrency wallet is readily identifiable, sufficiently distinct and capable of being allocated uniquely to an individual account holder: [104]–[108]. Second, the cryptocurrency was identifiable by third parties, in that only the holder of a private key is able to access and transfer the cryptocurrency from one wallet to another: [109]–[113]. Third, the cryptocurrency was capable of assumption by third parties, in that it can be and is the subject of active trading markets where the rights of the owner in that property are respected, and it is potentially desirable to third parties such that they may want to obtain ownership of it themselves: [114]–[116]. And fourth, the cryptocurrency had some degree of permanence or stability, as the entire life history of a cryptocurrency is available in the public record keeping of the blockchain: [117]–[119].

Pausing there, several observations should be made concerning that analysis. First, Gendall J treated Lord Wilberforce’s statement as a “definition of property”. However, as Professor Robert Stevens has pointed out, Lord Wilberforce was doing no more than stating necessary conditions, not sufficient ones (139 LQR at 622). Second, although Gendall J quoted extensively from the UK Jurisdiction Taskforce’s Legal Statement, his Honour did not refer to a technical problem with the view that cryptocurrency is capable of assumption by third parties which was adverted to in that report (at [45]). In order to make a transfer within the cryptocurrency system, the transferor typically brings into existence a new cryptoasset, with a new pair of data parameters: a new or modified public parameter and a new private key. The data representing the “old” cryptoasset persists in the network, but it ceases to have any value or function because the cryptoasset is treated by the consensus as spent or cancelled so that any further dealings in it would be rejected. The “new” cryptoasset is represented by new data and controlled by a new key. This is an intentional design choice to avoid the possibility of the same cryptocurrency being able to be spent more than once (as the UK Law Commission pointed out at [6.28] in its Report No. 412). The UK Jurisdiction Taskforce sought to resolve that problem by drawing an analogy with a bank payment where no property in the payer’s funds passes to the payee; instead, new property is created by the credit to the payee’s account. That appears to be an argument as to the substance of the transaction (namely, a transfer of persistent value) being preferred to the technical form of it (namely, the extinction of the old asset and the creation of a new one), and does appear to resolve the technical problem with the nature of a transfer within the cryptocurrency system. I will later consider a further answer to the problem when I deal with the Australian position. The third observation is that the stability of cryptocurrency may be qualified by the time required for a consensus to form as to the state of the ledger or by a change in the consensus rules being proposed but not unanimously adopted, as the Taskforce pointed out (at [54]-[55]). However, permanence and stability are relative concepts, and the Taskforce regarded them as sufficiently established for cryptocurrency to be treated as property, at least for a commercial cryptoasset system with a significant number of participants, an established history of transactions and a generally stable set of rules (at [56]).

Returning to Gendall J’s reasoning, his Honour then dealt with two arguments that are most commonly raised to suggest that cryptocurrencies are not “property”. The first argument is that the common law recognises only two classes of personal property: choses in possession (being tangibles) and choses in action. Cryptocurrencies are said to be neither, because they are intangible, and because there is no counterparty against whom the right could be enforced by legal action. I will return to this subject later, but Gendall J regarded this issue as simply one concerning the number of categories of “property” one needs rather than the limits of what can be recognised as “property”: [123].

The second argument is that information is not generally recognised as a form of “property”, and cryptocurrencies might be said to be a form of information. Gendall J rejected that argument on the basis that it is wrong to regard cryptocurrencies as “mere information”. In the first place, the whole purpose behind cryptocurrencies is to create an item of tradeable value, not simply to record or to impart in confidence knowledge or information: [127(a)]. Although cryptocoins are not backed by the promise of a bank, the combination of data that records their existence and affords them exclusivity is otherwise comparable to the electronic records of a bank, and the private key is akin to a PIN: [127(a)]. Gendall J referred to the rationale for information not being regarded as property as being that information can be infinitely duplicated: [127(c)]. That is not true of cryptocurrency, where every public key recording the data constituting the cryptocurrency is unique on the system where it is recorded, and also protected by the associated private key from being transferred without consent. That prevents the holder of the private key from double-spending and ensures that the asset cannot be under the simultaneous control of different persons. Gendall J also referred to cryptocurrency systems providing a more secure method of transfer than a mere assignment of a chose in action, in light of the fact that it is possible in equity for the holder of a chose in action to assign it multiple times and the winner may not be the first assignee in time. By contrast, cryptocurrency can only be sold once: [127(d)]. These points seem to me to be well made, although one qualification should be made. The UK Jurisdiction Taskforce pointed out (at [65]) that if one takes the private key in isolation from the conglomeration of public data, private key and system rules, then the private key is no more than an item of pure information, and as such, the UK Jurisdiction Taskforce said that it cannot in itself be treated as property. I will say more about that point a little later.

Finally, Gendall J dealt with public policy arguments, pointing out that some types of cryptocurrency are used by criminals but that cryptocurrencies have also become popular with honest people as a method of effecting payments and of investing: [129]. His Honour said that honest commercial developments may very well be hindered by a failure of the general law to recognise cryptoassets as property, notwithstanding any possible need for more formal regulation of cryptocurrencies: [130].

Overall, I respectfully agree with the conclusion that cryptocurrency is property, although there is more to be said in the Australian context as to the particular strands of legal reasoning which led Gendall J to that conclusion. I note that Gendall J’s reasoning was followed in Hong Kong in March last year by Linda Chan J In Re Gatecoin Limited (in liq) [2023] 3 HKC 401 at [56]–[59], a case concerning the winding up of a cryptocurrency exchange platform. In the course of her Honour’s reasoning, it appeared to be accepted that cryptocurrencies are not choses in action, as they do not embody any right capable of being enforced by action: [47]. I will say more about that issue in due course.

In the United Kingdom, Bryan J came to the same conclusion in AA v Persons Unknown [2019] EWHC 3556 (Comm) in the context of an application for a proprietary injunction, which raised the fundamental question as to whether or not the bitcoins in question were property at all. Bryan J said that, prima facie, there is a difficulty in treating cryptocurrencies as a form of property, saying that they are neither choses in possession because they are virtual and not tangible, nor are they choses in action “because they do not embody any right capable of being enforced by action”: [55]. Bryan J said that there was a difficulty because English law traditionally views personal property as being of only two kinds, choses in possession and choses in action, citing the famous passage from Fry LJ’s reasons in Colonial Bank v Whinney (1885) 30 ChD 261 that:

All personal things are either in possession or action. The law knows no tertium quid between the two.

Bryan J then quoted extensively from the UK Jurisdiction Taskforce’s Legal Statement, which treated Colonial Bank v Whinney as no more than a case on the construction of the Bankruptcy Act 1883 and advanced the proposition that intangible assets which are not choses in possession or choses in action belong to a third category of personal property. That third category was said to include milk quotas (Swift v Dairywise Farms Limited [2000] 1 WLR 1177) and EU carbon emissions allowances (Armstrong v Winnington [2013] Ch 156).

I note that this supposed third category seems to have originated in the Privy Council’s decision in Attorney-General of Hong Kong v Nai-Keung [1987] 1 WLR 1339 at 1342, a case concerning export quotas. The UK Law Commission in its Digital Assets: Final Report in 2023 (Law Comm No. 412) also supported the notion that cryptocurrency belonged in this third category of things to which personal property rights can relate: see paras 2.52-53, 3.3, 3.25-30, 3.36-58, 3.65-69 and 4.1-5. The UK Law Commission pointed out that some cryptoassets are explicitly designed not to consist of a legal right or claims against a legal person, and bitcoin and ether are examples of cryptoassets to be used regardless of their legal recognition and enforceability (at [2.49]).

Bryan J then expressed agreement with the UK Jurisdiction Taskforce’s analysis, and with its conclusion that a cryptoasset might not be a thing in action on a narrow definition of that term, but that does not mean that it cannot be treated as property: [59]. Bryan J added that cryptocurrency meets the four criteria set out in Lord Wilberforce’s classic statement in National Provincial Bank v Ainsworth: [59]. While I agree with the main thrust of this reasoning, the mental gymnastics involved in creating a third category of personal property made up of such diverse subject matter as milk and export quotas, on the one hand, and cryptocurrency, on the other hand, are an unnecessary distraction in the Australian context, as I will explain.

The UK Court of Appeal approved Bryan J’s reasoning in Tulip Trading Limited v Bitcoin Association for BSV [2023] EWCA Civ 83 at [24], one of the more successful litigious outings by our compatriot Dr Craig Wright. You win some, you lose some. In delivering the lead judgment, Birss LJ said in relation to bitcoin that the signing of the hashed transaction record with users’ private keys, and the incorporation of these records into a hashed chain of blocks produced by the proof of work, solves the double-spending problem, being a characteristic of bitcoin which does not emerge as a matter of law or convention but merely as a matter of fact from the way the software works. His Lordship said that it is thus meaningful to describe cryptocurrency not merely as something which is transferable but as “rivalrous”, in the sense that the holding of it by one person necessarily prevents another from holding that very thing at the same time. Because the holder cannot double spend their cryptocurrency, it can be said to be capable of assumption by a third party, referring to what his Lordship described as the “definition of property” in National Provincial Bank v Ainsworth.

In Singapore, Simon Thorley IJ of the Singapore International Commercial Court was prepared to assume that cryptocurrencies may be treated as property that may be held on trust in the absence of any dispute that they may be treated as property in a generic sense in B2C2 Ltd v Quoine Pte Ltd [2019] 4 SLR 17 at [142]. On appeal, the Court of Appeal said that there may be much to commend the view that cryptocurrencies should be capable of assimilation into the general concepts of property, but said that there were difficult questions as to the type of property that is involved and it was not necessary for the Court to come to a final position in that case: Quoine Pte Ltd v B2C2 Ltd [2020] 2 SLR 20 at [144].

The issue arose again in the Singapore High Court in ByBit Fintech Limited v Ho Kai Xin [2023] SGHC 199. Jeyaretnam J began by noting that cryptoassets, notwithstanding their novelty, have not only been transferred for value but also, when held by companies, appear on a balance sheet: [29]. His Honour said that cryptoassets are not classed as physical assets because we cannot possess them in the way we can possess objects like cars or jewellery, and they do not have a fixed physical identity: [31]. It was said that they certainly meet Lord Wilberforce’s criteria in National Provincial Bank Ltd v Ainsworth: [33]. Jeyaretnam J then dealt with the question whether cryptocurrency can be classed in the category of things in action, noting that the argument against that classification rests on the origin of this category as rights enforceable by action against persons (in the sense of litigation in court), and there is no individual counterparty to the crypto holder’s right: [34]. However, his Honour reasoned that over time the category of things in action has expanded to include a diverse range of incorporeal property and the category of things in action is broad, flexible, and not closed: [35]. It was said that these features explain and justify the statement in Colonial Bank v Whinney  that all personal things are either in possession or action and there was no third category: [35]. Jeyaretnam J thus concluded that the holder of a cryptoasset has in principle an incorporeal right of property recognisable by the common law as a thing in action, although added (in my view unnecessarily) “and so enforceable in court”: [36]. His Honour then drew an illuminating analogy with how the law approaches other social constructs, such as money, saying that it is only because people generally accept the exchange value of shells or beads or differently printed paper notes that they become currency. Money was thus said to be accepted by virtue of a collective act of mutual faith: [36]. That reasoning, in my view, is closer to how I expect an Australian court would approach the issue, untroubled by the width of the category of things in action and cognisant of the simple fact that cryptocurrency is being actively traded for value and is generally accepted by the commercial community as an asset of a proprietary character.

In Canada, like Australia, it has been assumed without any detailed reasons that cryptocurrency could be property: Shair.Com Global Digital Services Ltd v Arnold [2018] BCSC 1512 at [13]–[15] and [24] (Skolrood J).

So how then would an Australian Court approach the problem? The starting-point should be the conceptual nature of property, rather than Lord Wilberforce’s statement in National Provincial Bank Limited v Ainsworth. In Yanner v Eaton (1999) 201 CLR 351 at [17], a case about the quintessentially Australian problem of rights over hunting estuarine crocodiles in Queensland, Gleeson CJ, Gaudron, Kirby and Hayne JJ made it clear that property is a description of a legal relationship with a thing, not the thing itself, and is usually treated as a bundle of rights. Their Honours described property (at [18]) as “a legally endorsed concentration of power over things and resources”, noting that Jeremy Bentham had pointed out that in common speech in the phrase “the object of a man’s property”, the words “the object of” are commonly left out. The upshot is that “property” can be used to describe all or any of very many different kinds of relationship between a person and a subject matter: [20]. That reasoning was endorsed by the unanimous High Court in Telstra Corporation Ltd v Commonwealth (2008) 234 CLR 210 at [44], and by the majority of the High Court in Hocking v Director-General of the National Archives of Australia (2020) 271 CLR 1 at [89] (Kiefel CJ, Bell, Gageler and Keane JJ) and [171] (Gordon J). It is worth noting that the UK Jurisdiction Taskforce began with these propositions in analysing whether cryptocurrency is property, and the only authority which the Taskforce cited in support was Yanner v Eaton: see [35] of the Legal Statement.

Continuing the theme of versatility and variety in our conception of property, the next important step should be to consider the meaning of “chose in action”. In Australia, there is no need to seek to create a third category of personal property, beyond choses in possession and choses in action, as the High Court in 1954 made it clear that choses in action are not limited to rights enforceable by a court. There is therefore no obstacle in Australia in treating cryptocurrency as a chose in action despite the absence of an identified or identifiable counterparty. The case in question is National Trustees Executors and Agency Company of Australasia Limited v Federal Commissioner of Taxation (1954) 91 CLR 540, but as there are five High Court cases by that name, I will refer to it as Cain’s Case. The case concerned a problem as quintessentially Australian as the hunting of estuarine crocodiles, namely the right of a pastoralist to share in the profits which the UK Government had agreed to divide equally with the Commonwealth Government from its sale of wool during the Second World War. The late Mr Cain had died after the relevant Commonwealth statute was enacted, at a time when it was practically certain that there would be surplus profits available, but before the Minister had declared that an amount would be available for distribution to pastoralists. The question was whether Mr Cain’s entitlement to payment was part of his personal property for estate duty purposes. By a bare majority, the High Court held that the statute created a proprietary right to share in the distributions afterwards to be made, thereby making the estate liable for duty. That was despite the fact that s 28 of the Act provided that no proceedings could be brought against the Commonwealth to recover monies under the Act, and despite the fact that s 29 provided that a share in a distribution under the Act was absolutely inalienable by way of sale, assignment, charge or otherwise prior to receipt of the share. It is those two statutory provisions that make Cain’s Case so illuminating for the present topic. Two points of fundamental legal principle emerge from the reasons.

First, Kitto J (with whom Dixon CJ and Fullagar J agreed) held that it is not necessary in order for property to be classified as a chose in action that it be enforceable by action in court. The argument for the executor of Mr Cain’s estate involved two propositions: first, that all personal property known to the law must consist either of choses in possession or of choses in action; and second, that choses in action comprise only rights enforceable by action in the courts (at 584). However, Kitto J observed that the term “chose in action” furnished an instance of the subject-matter of property having outgrown its nomenclature, and said that the second proposition needed to be recast in more flexible terms if the first was to be accepted (at 584). His Honour observed that the term “choses in action” comprised a heterogeneous group of rights which have only one common characteristic, namely that they do not confer the present possession of a tangible object. Reference was made to Sir William Holdsworth’s History of English Law which showed that the meaning of the term had become progressively extended to accommodate many forms of personal property which were not within the original conception of a right to be asserted by an action in court. For example, a debt remained a kind of personal property even after becoming statute barred (at 584–5). More importantly for the decision in Cain’s Case, government bonds and debts could not be the subject of a suit against the Crown in England until the Crown Proceedings Act 1947 came into operation, but no one could doubt that a debt owed by a government was personal property, and indeed government bonds were among the most common forms of such property (at 585–6). Similarly, foreign government bonds could not be sued for, but there was no doubt that foreign bonds were property, both in common language and in the language of lawyers (at 586). The two dissentients, McTiernan and Taylor JJ, also agreed that it was not necessary that the right be capable of enforcement by legal process, as illustrated by a statute-barred debt and by foreign government securities, which were said to be “so much a subject of trade that it would be idle to deny that a holder, being possessed of a saleable commodity, is not the owner of property” (at 566). I note that the principle that a chose in action need not be legally enforceable by court process has not been doubted in Australia since that decision, and was reiterated by Gummow J in Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 at [180]. Accordingly, there is no need in Australia to resort to a third category to accommodate assets which could not be enforced by way of legal process. Nor is there any need to explain Colonial Bank v Whinney as not meaning what it says as a matter of general principle for which it has been treated as authoritative for almost 140 years. We are thus spared the unedifying task of trying to explain how milk quotas and cryptocurrencies are like cases which must be treated alike. The fundamental flaw in this so-called third category is that it artificially narrows the range of circumstances from which appropriate analogies are drawn in the task of treating like cases alike. We should always conserve good things when worse things are proposed to be put in their place.

The second principle to emerge concerned the impossibility of alienating the right by reason of s 29 of the Act. Kitto J (again with the agreement of Dixon CJ and Fullagar J) said “categorically” (his word) that alienability is not an indispensible attribute of a right of property according to the general sense which the word “property” bears in the law (at 583). Kitto J said the rights may be incapable of assignment either because assignment is considered “incompatible with their nature”, as was the case originally with debts (subject to an exception in favour of the King), or because a statute so provides, or considerations of public policy so require, as was said to be the case with some salaries and pensions (at 583). However, Kitto J said that they are all within the conception of “property” as the word is normally understood. Indeed, Sir William Holdsworth in his History of English Law said that there was a tendency at one time to regard the non-assignability of a right as actually being the feature which qualified it to be classified as a chose in action (at 583). This principle has consequences for how Lord Wilberforce’s dictum in Ainsworth should be viewed in Australia. In The Queen v Toohey; ex parteMeneling Station Pty Ltd (1983) 158 CLR 327 at 342, Mason J cited Lord Wilberforce’s statement in Ainsworth, but said that assignability is not in all circumstances an essential characteristic of a right of property, noting that by statute some forms of property are expressed to be inalienable. Mason J did not refer to Cain’sCase, but five members of the High Court did so in Federal Commissioner of Taxation v Orica Ltd (1988) 194 CLR 500 at [91] (Gaudron, McHugh, Kirby and Hayne JJ) and [110] (Gummow J), as too did Gummow J in Yanner v Eaton at [85], when making the same point that property need not necessarily be susceptible of transfer. I mentioned before that, in a technical sense, cryptocurrency is not transferred in an on-block transaction. Rather, the old asset is replaced by a new one. The UK Jurisdiction Taskforce treated that as overly technical, and I am inclined to agree, but in Australia even if the technical point were regarded as meritorious, a further argument is available that transferability is not invariably required for an asset to be regarded as property.

The next step should be to confront the supposed obstacle that cryptocurrency is information, and information is not property. I have referred already to Gendall J’s reasoning in Ruscoe v Cryptopia Limited (in liq) at [126]–[128] that cryptocurrency is not mere information, with which I respectfully agree. That is a conclusion with which the UK Jurisdiction Taskforce also agreed in relation to cryptoassets when viewed as a conglomeration of public data, private key and system rules. However, the Taskforce treated the private key viewed in isolation as being no more than an item of pure information which cannot in itself be treated as property (at [65]).

The general objection to information being treated as property was expressed by Lord Upjohn in Boardman v Phipps [1967] 2 AC 46 at 127 as being that information is normally open to all who have eyes to read and ears to hear. As Professor Robert Stevens expressed the point (139 LQR at 617), if I know where a pot of gold is buried, another may be prepared to pay me a very large sum of money for this information. However, if another independently of me discovers the same fact, I have no claim against them and I have no right, without more, against anyone to information as such. However, as the UK Jurisdiction Taskforce reasoned, cryptoassets do not raise the difficulty that information in general is not exclusive because it can be easily duplicated, and once disseminated, information can be used simultaneously by different people (at [62]). Although the data associated with a cryptoasset can be duplicated, the transaction ledger and consensus mechanisms prevent the holder of the private key from double-spending and so ensure that the asset cannot be under the simultaneous control of different persons (at [63]).

I agree generally with the Taskforce’s analysis, including the proposition that the private key viewed in isolation is not strictly speaking, an item of property. However, the private key viewed in isolation may still have some of the characteristics of property. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [118] the High Court referred to the way in which the protection given by equitable doctrines and remedies causes confidential information sometimes to be described as having a proprietary character, not because property is the basis upon which that protection is given, but because of the effect of that protection. As their Honours noted, certain types of confidential information show characteristics with standard instances of property, and thus trade secrets may be transferred, held in trust and charged (citing Smith Kline & French Laboratories (Aust) Ltd v Department of Community Services and Health (1990) 22 FCR 73 at 121 per Gummow J). In my view, cryptocurrency provides at least as strong a case as conventional “trade secrets” for such transactions to be recognised. The data in the public and private keys do not contain any information by way of business or scientific ideas which would be worth disseminating for the sake of the information which it contains. Rather, the commercial value of that data lies in the fact that the person with access to it is able to undertake dealings in the cryptocurrency in accordance with the rules of the system. It operates like the code to a safe, except that it is a great deal longer and there is no physical safe to open. We are thus a long way removed from the general objection to information as property that the information has an inherent value and benefit over which there is no exclusive right or control.

Finally, as to public policy considerations, unless and until the legislature intervenes to constrain the exercise of freedoms which the common law allows and protects, I do not see that there is any legitimate objection in public policy to the use and exploitation of cryptocurrency as a species of property. No doubt there are many in the criminal demi-monde who enjoy the anonymity (or more accurately, the pseudonymity) provided by cryptocurrency. However, a very great number of honest people are, as a matter of fact, currently buying and selling cryptocurrency, declaring trusts over it, and bequeathing it in their wills. If the recent history of market volatility continues, some will inevitably be called upon to declare it as part of their personal property to their trustees in bankruptcy. To borrow a phrase from Tim Winton’s Cloudstreet, it looks like an ordinary projectile waiting for gravity to have the last word. In my view, the overall question of legal policy points strongly towards the recognition of cryptocurrency as property. The judgments in Cain’s Case refer on multiple occasions to the actual conduct of the commercial community in the way in which assets are traded or otherwise dealt with as a compelling reason for recognising those assets as proprietary in nature. The point appears most explicitly in the reasons of McTiernan and Taylor JJ to which I have already referred, to the effect that foreign government securities “are so much a subject of trade that it would be idle to deny that a holder, being possessed of a saleable commodity, is not the owner of property” (at 566).

Kitto J said in Cain’s Case (at 586) that it was too dangerous to attempt to define “property”. I do not have the self-harming need, or the self-assurance, for that kind of excitement. However, I will attempt an answer to the narrower question: what is it about cryptocurrency that makes it a kind of property? Most fundamentally, the answer lies in the fact that it is actively bought and sold, and it is therefore sufficiently analogous to things which are already treated as property. And it would not be actively bought and sold unless it was sufficiently definable, identifiable by third parties, capable of assumption by third parties, and permanent and stable. These are all relative concepts and raise questions of degree. As we know from Cain’s Case (contra Lord Wilberforce), not all of them must be satisfied in order for something to be treated as property. Ultimately, if market participants in very large numbers are satisfied of those matters in undertaking transactions on the basis that cryptocurrency is property, then it would be most surprising if the judiciary were to disagree.

That seems to me to be consistent with the traditional methodology of the common law, as one of the finest practical expressions of British empiricism. The common law method operates by close observation of the facts as they are revealed by actual experience in the real world, and provides an educated response to those facts, reasoning by analogy from other observed circumstances. In that way, the common law fulfils its purpose of embodying in a relatively predictable way the reasonable expectations of ordinary and honest people. Nor should statutory intervention be preferred to common law development. A statute is unlikely to keep pace with technological innovations and be capable of handling new implementations of the technology. There seems to me to be a real prospect that the rigidity of a statute would inhibit experimentation, and suffers from the problem that you cannot regulate something in advance of its invention. The genius of the common law lies in the way in which well-reasoned statements of fundamental principle can be adapted and applied to circumstances which previous generations could never have imagined. There is no need to lament that the Dixon High Court was not equipped with an understanding of the wonders of blockchain technology. We should view the common law as a geologist sees a landscape: different eras co-exist irrespective of their chronological order.