Australian Court Rules Bitcoin as Property in Digital Asset Update

In exciting news from Australia, a recent decision by the State Supreme Court has conclusively determined that cryptoassets can indeed be considered property. This marks a significant milestone, as it resolves a longstanding question within the country and aligns Australian courts with similar rulings in various other jurisdictions around the world.

The issue of whether cryptoassets qualify as property has been a topic of debate for some time. Earlier, in February 2023, Ashurst addressed this very question, highlighting the unique challenge posed by cryptoassets that don’t neatly fit into the established categories of property. Historically, property has been classified as either something that can be possessed or something that grants a legal right, but cryptoassets seemed to straddle these definitions.

While courts in other countries had recognized cryptoassets as property based on traditional property law principles, the matter had remained unresolved in Australia until now. However, in a recent case titled Re Blockchain Tech Inc (Blockchain), the Supreme Court of Victoria definitively ruled that an interest in a cryptoasset, specifically Bitcoin in this instance, can indeed constitute a proprietary interest.

The case centered around the alleged agreement between Blockchain Tech and a defendant to hold 36 Bitcoin for the purposes of auditing a superannuation fund. The plaintiffs claimed that the Bitcoin were provided under a bailment agreement, implying that Blockchain Tech intended for them to be returned after the audit. The key question was whether an interest in Bitcoin could be considered property, and if so, what form that interest took.

The court ultimately determined that an interest in Bitcoin met the criteria for property based on several factors. Each Bitcoin was identifiable and distinct, linked to a specific public key on a public ledger, providing a level of permanence and stability to the asset. Additionally, an interest in a cryptoasset wasn’t merely a matter of information but included rights to engage in transactions and exclude third parties from interference.

Despite the unique nature of blockchain transactions, where ownership isn’t physically transferred but recorded on the blockchain through digital signatures, the court found that the intangible nature of cryptoassets didn’t negate their status as property. This ruling affirmed that an interest in a cryptoasset could be classified as a chose in action, encompassing a range of rights without direct possession of a tangible object.

In practical terms, this decision clarifies the legal status of cryptoassets in Australia, recognizing them as distinct forms of property that can be subject to proprietary interests. This groundbreaking ruling brings greater clarity to the evolving landscape of digital assets and underscores the importance of recognizing their unique characteristics within the realm of property law.