Federal Court endorses view that cryptocurrency is capable of being property

The decision concerns ASIC’s proceedings against NGS Crypto Pty Ltd and its affiliates (NGS) over an allegedly unlicensed managed investment scheme. On 10 April 2024, the Federal Court (Justice Meagher) granted urgent interim receiver and asset preservation orders sought by ASIC over cryptocurrency assets held by NGS (Orders). The Orders were made under s 1323 of the Corporations Act, which empowers the court to make orders in certain circumstances prohibiting payment or transfer of money, financial products or other property. 

On 27 May 2024, NGS filed an interlocutory application in the Federal Court to set aside or vary the Orders. One of the grounds  NGS argued was that the cryptocurrency assets weren’t ‘property’ under the Corporations Act for the purposes of granting an interlocutory injunction. NGS relied on the lack of Australian authority supporting the position that cryptocurrency is property, referring to the case of ASIC v Web3 Ventures Pty Ltd [2024] FCA 64 (Web3). 

We have previously discussed the implications of the Web3 decision this article. Since that decision, the issue of whether cryptocurrency is property under common law remained a matter of legal controversy. In that case, Justice Jackman of the Federal Court noted there is legal controversy as to whether cryptocurrency is property under common law. However, he declined to form a view on the matter and expressed no opinion on it, as it was not necessary in those proceedings

In addressing the question of cryptocurrencies being property, ASIC submitted that its case didn’t rely on cryptocurrencies being ‘property’ under the Corporations Act and that in any event:

‘cryptocurrency has been held to be property by the English Court of Appeal and in other jurisdictions, and ASIC has previously obtained similar orders for the appointment of receivers over digital currency assets.’

Justice Collier of the Federal Court ultimately decided not to set aside the Orders, determining that the cryptocurrency assets constituted property for purposes of the interlocutory application. In rejecting NGS’ application, Justice Collier held that, ‘at an interlocutory level, the definitions of financial service, financial product, financial investment and property in the Corporations Act are sufficiently broad to encompass cryptocurrency assets in appropriate circumstances, and the orders made by her Honour’.

The Federal Court’s decision was supported by Justice Jackman’s recent paper ‘Is cryptocurrency property’ delivered on 21 June 2024 to the Commercial Law Association. Justice Jackman stated that cryptocurrency was, in effect, assumed to be property in the two cases which might have analysed the issue: Commissioner of the Australian Federal Police v Bigatton [2020] NSWSC 245 (Cavanagh J) and Chen v Blockchain Global Limited (2022) 66 VR 30 (Attiwill J)). Interestingly, Justice Jackman’s paper was published after his decision in Web3, where he declined to express his opinion on the issue. 

Justice Collier also referred to the detailed analysis of Justice Gendall in the High Court of New Zealand in Ruscoe v Cryptopia Limited (in liq) [2020] 2 NZLR 809. That case determined that cryptocurrency was a species of intangible personal property capable of being held on trust.

In conclusion, the court was satisfied the Orders were validly made on the basis that cryptocurrency is included within the definition of property in the Corporations Act, at least at the interlocutory stage.

Although the decision was of an interlocutory nature, it clarifies how Australian courts may categorise crypto-related products in future and is a step closer towards Australian courts formally recognising cryptocurrency as a type of property. 

Moreover, the court’s reliance on Justice Jackman’s speech –while not binding at law – may be influential on other Australian courts when they’re called upon to determine whether cryptocurrency is property at law.