UK High Court clarifies the status of crypto currencies in the legal system

Summary
In the important decision of AA v Persons Unknown & Ors [2019] EWHC 3556 (Comm), a UK High Court held that crypto assets like Bitcoin could constitute part of the definition of ‘property’ and thus, granted a proprietary injunction in favour of an insurance company of which one of their customers was a victim of cybercrime. In doing so, the court held under its consideration the ‘Legal Statement on the Status of Crypto assets and Smart Contracts’ (hereinafter the Legal Statement) by the UK Jurisdictional Taskforce.

Facts
An English insurance company brought a claim against four defendants in respect of ransom Bitcoin that was paid in relation to one of their clients that was hacked. The four defendants included the people asking for the ransom, the persons which held the Bitcoin ransom and two trading corporations. The customer’s computer system was hacked and encrypted, and the insurance company paid the ransom in Bitcoin on behalf of its customer. The necessary decryption tools were provided to the claimant’s customer allowing them to operate their system again.

The insurance company brought an ex-parte application seeking an interim proprietary injunction giving the importance of claiming the money back before the Bitcoin was dissipated. When examining such application, the court cited the traditional view that property could only be ‘chose in possession or a chose in action’. The court explained that Bitcoin is neither choses in possession as they are virtual and so not tangible nor choses in action as they do not represent any right capable of being enforced by action.

Nevertheless, the court suggested that it was "fallacious to proceed on the basis that the English law of property recognises no forms of property other than choses in possession and choses in action". Furthermore, the Legal Statement was mentioned that while a ‘crypto asset might not be a thing in action on the narrower definition of that term does not in itself mean that it cannot be treated as property’. Additionally, the four characteristics of property as per National Provincial Bank Ltd v Ainsworth [1965] A.C. 1175 were applied to Bitcoin in that they are (i) definable, (ii) identifiable by third parties, (iii) capable of assumption by third parties and that (iv) they had some degree of permanence. Hence, the court was satisfied that Bitcoin constitutes property, and was capable of being the subject of a proprietary injunction.

Commentary
This decision is important for financial institutions which may face similar cyber-attacks. It has paved the way for crypto litigation by adapting the law to include technological advances like crypto currencies as part of the definition of property, in so far as interim injunctions are related.

This decision is also revenant to the Cyprus Courts as by virtue of article 29(1)(c) of the Courts of Justice Law 1960, in the absence of any provision to the contrary, the common law and doctrines of equity apply to the Courts of Cyprus.
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