Shearman & Sterling LLP | FinTech Insights | U.K. Court Confirms Bitcoin Status as Property for Certain Proprietary Claims
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  • U.K. Court Confirms Bitcoin Status as Property for Certain Proprietary Claims
    01/17/2020
    A U.K. court has granted an interim proprietary injunction over Bitcoin held in an account of a cryptocurrency exchange after it had been transferred there as part of a cyber attack on a Canadian insurance company. The judgment in AA v Persons Unknown & Ors, Re Bitcoin [2019] EWHC 3556 (Comm) was given on December 13, 2019, and following the lifting of reporting restrictions, was released for publication on January 17, 2020. In coming to its decision, the High Court adopted the analysis as to the proprietary status of crypto assets set out in the recent legal statement by the U.K. Jurisdiction Taskforce. Although each case will depend on the relevant facts and issues, the decision confirms that crypto assets are a form of property capable of being the subject of a proprietary injunction.

    The Canadian insurance company is insured with the Applicant, an English insurance company, against cyber attacks. The Canadian insurance company had been hacked and its computer systems were encrypted. It paid the Bitcoin ransom to obtain the decryption tool to restore the use of the computer systems. The Bitcoins were tracked; some had been transferred into fiat currency, but a substantial portion had been transferred to the cryptocurrency exchange.

    The High Court decided that the claimant had satisfied the requirements for an interim proprietary injunction, namely that there was a serious issue to be tried concerning a proprietary claim. The Court departed from previous case law stipulating that under English law property can only be either a chose in possession or a chose in action, stating "it is 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". Instead the Court agreed with the analysis and conclusions of the UKJT that although a crypto asset may not be a thing in action, it does not mean that it cannot be treated as property. The Court also noted that the same conclusion had been reached last year by the Singapore International Commercial Court and in two English Courts in Vorotyntseva v Money -4 Limited t/a as Nebeus.com [2018] EWHC 2598 (Ch) and Robertson v Persons Unknown (unreported 15 July 2019).