Australian Courts Explore Concept of Cryptocurrency as Property
The New South Wales District Court allowed the use of cryptocurrency as security in commercial litigation.
Could cryptocurrency be considered as property in the future? An Australian court spearheaded the investigation towards this reality by allowing the claimant to pay in cryptocurrency as security for costs.
Commercial litigation provides that the unsuccessful party in the litigation usually pays for the legal costs incurred by the successful party. If there are concerns regarding the claimant’s capacity to pay, the defendant can forward an application asking for a specified amount of money to be paid into a trust account where it will remain until the end of the litigation. Aside from direct payment, this could also be a bank guarantee.
In Hague v Cordiner (No. 2)  NSWDC 23, the Judge of the New South Wales District Court allowed the claimant to use his cryptocurrency reserves as security.
The Judge also required the claimant to provide bank statements to the defendant’s solicitors on a regular basis and to notify them within twenty-four hours if the digital reserves drop below the amount of the security.
Despite this decision originating from a lower court, it is a significant step towards establishing what cryptocurrencies are and are not capable of doing, particularly whether it could be identified as property.
On April 8, 2020, the New Zealand High Court held that cryptocurrencies are “a form of intangible property” due to three features:
- The public key recording the unit of currency
- The private key attached to the corresponding public key
- The new private key generated after the transfer of a relevant coin.
These indicate that cryptocurrency has a definition, as indicated by the public key. In addition, it is stable and controlled enough to qualify for ownership and for creating a market.
The cryptocurrency industry suffers from a lack of regulation. While they can be bought and sold using traditional money, these exchange platforms are not regulated and there are no safeguards against unauthorized or incorrect debits from the digital wallet. In addition, users remain relatively anonymous in the cryptocurrency system and there is no central data bank that can offer recourse if digital currencies or ICO tokens are stolen.
Regulators continue to work hard toward the integration of cryptocurrencies, which is encouraging for us all.