Australian Court Recognizes Bitcoin as Property in Landmark Ruling
In a significant legal development, the Supreme Court of Victoria has declared that Bitcoin qualifies as property in a landmark case. Justice Attiwill’s ruling in the case of Re Blockchain Tech Pty Ltd [2024] VSC 690 establishes that a person’s interest in Bitcoin possesses all the characteristics of property, aligning Australia with other common law jurisdictions such as the UK, New Zealand, Hong Kong, and Singapore.
The case arose when the plaintiffs alleged that 36 Bitcoin, valued at over AUD 5 million, were transferred to the first defendant under a bailment agreement. They contended that Blockchain Tech was entitled to reclaim these assets. Furthermore, the plaintiffs claimed that an additional 25 Bitcoin had been transferred to an exchange for working capital purposes and were held in trust by the first defendant, who was accused of failing to account for the funds that were allegedly misappropriated for personal expenses.
In his ruling, Justice Attiwill referenced recent judgments from Australia and substantive rulings from New Zealand and England and Wales, concluding that Bitcoin, being an intangible asset, meets the four classic criteria for property under the common law Ainsworth test. These criteria are:
- The property must be identifiable by subject matter.
- It must be identifiable by third parties.
- It should be capable of assumption by third parties.
- It must possess a degree of permanence or stability.
Justice Attiwill elaborated on these points, stating that Bitcoin is identifiable as it exists as an electronic currency recorded on a shared public ledger. Each Bitcoin can be traced to a specific address, allowing individuals to control and manage their holdings while excluding others from access. He emphasized that Bitcoin has a stable presence on this ledger, maintaining its identity until a transaction alters its status.
The ruling further clarified that although transferring Bitcoin does not involve the physical transfer of ownership, this does not negate its classification as property. Attiwill noted that the ability to alienate property is not a necessary characteristic, distinguishing Bitcoin from mere information or data.
Justice Attiwill also referenced comments from Justice Jackman regarding the nature of cryptocurrency as property, citing a UK draft bill based on recommendations from the UK Law Commission, which supports the recognition of cryptocurrencies as property rights. However, he diverged from the UK Law Commission’s stance that crypto-assets do not fit neatly into existing categories of personal property. Instead, he classified Bitcoin as a chose in action, acknowledging that it is intangible and cannot be possessed physically.
Following this recognition of Bitcoin as property, Justice Attiwill determined that the 25 Bitcoin transferred to the first defendant were indeed held in trust. He ruled that Blockchain Tech was entitled to equitable compensation due to the defendant’s failure to account for the dissipated Bitcoin, although he clarified that the trustee’s obligation was to account for the Bitcoin’s value at the time of dissipation rather than at current market prices.
Justice Attiwill rejected the notion that Bitcoin could be classified under bailment, reinforcing its status as an intangible property form. His ruling is seen as a pivotal judicial precedent that could influence the recognition of other cryptocurrencies as property. The decision clarifies the rights of Bitcoin holders and extends the range of remedies available for recovering misappropriated crypto-assets.
The Victorian Court is set to hear further discussions regarding the specific orders in this case. While an appeal may be possible, the thorough analysis provided by Justice Attiwill, along with support from international legal precedents, suggests that overcoming this ruling may prove challenging.
This ruling not only establishes a crucial legal framework for Bitcoin in Australia but also highlights the evolving nature of cryptocurrency within the legal system, potentially paving the way for broader recognition and regulation of digital assets in the future.
