The question of whether cryptocurrencies can be considered as ‘property’ has been long debated in the legal world, both in England and beyond. Lord Wilberforce helpfully summarised the characteristics of property in National Provincial Bank v Ainsworth: ‘… 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’. Whether a cryptocurrency is defined as property can have a real impact on how the asset can be dealt with, whether it can be secured or charged, and – perhaps most importantly for present purposes – whether and how it can be seized or frozen for the purposes of enforcement.

Last year, the Singapore International Commercial Court recognised that cryptocurrencies can be considered as property capable of being held on trust in B2C2 Ltd v Quoine Pte Ltd. While the English courts had previously treated cryptocurrencies as property, the authorities did not analyse the issue in any depth. By way of example, in Liam David Robertson v Persons Unknown & Ors, Moulder J granted an asset preservation order and a Bankers Trust order over bitcoin. In Vorotyntseva v Money-4 Limited t/a Nebeus.com, Birss J granted a freezing order over bitcoin and ether. Importantly, neither party had argued that cryptocurrency could not be a form of property. These judgments were considered in the recent Legal Statement on the Status of Cryptoassets and Smart Contracts by the UK Jurisdictional Taskforce (UKJT), which concluded that crypto assets might not be classifiable as ‘things in possession’ or ‘things in action’, but can be treated as ‘another, third, kind of property’.

Most recently, in the important case for English insurers of AA v Persons Unknown and others, the English High Court considered the analysis in the UKJT as ‘compelling’ and granted an interim proprietary injunction in respect of a bitcoin ransom payment. The case arose following the computer hacking and encryption of a Canadian insurance company’s customer systems. Following the attack, the Canadian company, which was insured by an English insurer, was subject to a ransomware demand that to get its data back, it had to pay for a decryption tool in the amount of $1,200,000 in bitcoins. In light of the importance of the systems that had been encrypted, the English insurer agreed to pay $950,000 in ransom for the tool. The sum was paid in bitcoins. Following the payment and the recovery of the systems, investigations were carried out which tracked the bitcoins that had been transferred. The English insurer applied for a proprietary injunction over the bitcoins in order to recover the ransom payment.

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Originally published on 28 January 2020 on Penningtons Manches Cooper LLP website.