What is a Bitcoin in Law?

The price of Bitcoin bounced back above USD10,000 in the midst of fears over the economic uncertainties created by the new coronavirus, the COVID-19; undoubtedly, investors have taken Bitcoin and other cryptocurrencies as safe heaven assets on top of the traditional choice of gold.

Beside this financial correlation between Bitcoin and Virus, the author finds striking similarities between the two - both of them are ‘undesirable’ (in daily life) and ‘undecidable’. While the ‘undesirability’ part is self-explanatory, Virus in science (whether it is a living thing or not) and in philosophy (in Jacques Derrida’s postmodern thesis) and Bitcoin in law are both ‘undecided’.

In common law, “all personal things are either in possession or action. The law knows no tertium quid between the two.” (Colonial Bank v Whinney [1885] 30 Chi. D. 261). “Prima facie there is a difficulty in treating Bitcoins and other crypto currencies as a form of property: they are neither chose in possession nor are they chose in action. They are not choses in possession because they are virtual, they are not tangible, they cannot be possessed. They are not choses in action because they do not embody any right capable of being enforced by action…crypto currencies do not sit neatly within either category.” (AA v Persons Unknown [2020] 1 WLUK 91).

As of the date of writing, the author does not seem to have found any Hong Kong cases dealing with this categorisation question; the Hong Kong Court has been taking a pragmatic approach in handling all Bitcoin-related Mareva injunction applications.

Mr. Justice Bryan in AA v Persons Unknown on the other hand had the benefit of the legal statement on Crypto assets and Smart contracts published by the UK Jurisdictional Task Force in November 2019 placed before him; some of its paragraphs read as follows:

“77. Our view is that Colonial Bank is not therefore to be treated as limiting the scope of what kinds of things can be property in law. If anything, it shows the ability of the common law to stretch traditional definitions and concepts to adapt to new business practices (in that case the development of shares in companies).

…83. A number of important 20th century statutes define property in terms that assume that intangible property is not limited to things in action. The Theft Act 1968, the Proceeds of Crime Act 2002, and the Fraud Act 2006 all define property as including things in action "and other intangible property". It might be said that those statutes are extending the definition of property for their own, special purposes, but they at least demonstrate that there is no conceptual difficulty in treating intangible things as property even if they may not be things in action. Moreover, the Patents Act 1977 goes further in providing, at s30, that a patent or application for a patent "is personal property (without being a thing in action)". That necessarily recognises that personal property can include things other than things in possession (which a patent clearly is not) and things in action.”

Bryan J adopted the conclusion of the legal statement “that a crypto asset might not be a thing in action on a narrow definition of that term, but that does not mean that it cannot be treated as property" and considered that “a crypto asset such as Bitcoin are property”.

In situation where our Theft and Patents Ordinances mirror the corresponding Acts in UK and AA v Persons Unknown is of high persuasive value to the Hong Kong Court, can we comfortably say that the issue is decided?

For Bitcoin, yes, as it represents a value with no difference like other commodities. But for crypto currencies which are designed to be linked with value outside the blockchain, or to represent such a value or provide access to it (loosely ‘the utility token’), legislative (indeed securities law) amendments would be needed (for detail, see: Federal Council Report dated 14 December 2018 - Legal framework for distributed ledger technology and blockchain in Switzerland, An overview with a focus on the financial sector).

In other words, the issue is still ‘undecided’.

Jurisdictions: 

Liberty Chambers, Barrister-at-law

Foster is a criminal barrister with experiences and qualifications in multi disciplines. He is a life member of Invotech and its Blockchain Special Interest Group (SIG)