In a recent decision regarding a freezing order sought by the Australian Securities and Investment Commission (ASIC), the Federal Court of Australia has endorsed the view that cryptocurrency is capable of being “property” for the purposes of granting an interlocutory injunction.
The decision concerns ASIC’s proceedings against NGS Pty Ltd (NGS) and its affiliates over an allegedly unlicensed investment scheme. In April 2024, ASIC urgently sought ex parte orders to appoint receivers and to preserve cryptocurrency assets held by the defendants. Meagher J of the Federal Court supported the application and granted interim receiver and asset preservation orders.
However, on 27 May 2024, two of the defendants filed an application to set aside or vary the orders, which were the focus of this application. One of the grounds on which they applied to set aside the order is that cryptocurrency is not property. They claimed,
Cryptocurrency is not property within the meaning of that term in s 9 of the Corps Act. Therefore the defined term, “Digital Currency” in the Freezing Orders is flawed. Further, no Australian authority supports that cryptocurrency is property (see Web3), yet each defined term in the Freezing Orders assumes so. The Court was not informed of those two fundamental matters.
And that
There was no exploration by ASIC of whether cryptocurrencies constituted property under Australian law for the purposes of the Corporations Act.
In response, ASIC said in its submission that:
ASIC’s case does not rely on cyber currencies being ‘property’ under the Corporations Act. 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.
Collier J of the Federal Court rejected the defendant’s application and sided with ASIC. In considering whether cryptocurrencies constitute property, he said
I am satisfied 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 (as subsequently varied).
Collier J also draw support from Jackman’s recent speech on the topic entitled “Is cryptocurrency property” delivered on 21 June 2024 to the Commercial Law Association. In this speech, Jackman J gave the following reasons:
- 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); Chen v Blockchain Global Limited (2022) 66 VR 30 (Attiwill J)) and
- the analysis of Gendall J in the High Court of New Zealand in Ruscoe v Cryptopia Limited (in liq) [2020] 2 NZLR 809, where the Court held that the cryptocurrencies in question were a species of intangible personal property which were without question capable of being the subject matter of a trust, and not simply a form of information.
The issue of whether cryptocurrency is a type of property (and if so, which type) has repeatedly been argued by litigating parties and discussed in courts in different common law jurisdictions. So far cases in Australia, including this one, are mainly of interlocutory nature, while courts and law markers in other common law jurisdictions ( such as the UK) have been more progressive in paving the way for cryptocurrency to be recognised as a type of personal property.
The characterisation of cryptocurrency as personal property is an important threshold issue for legal recognition under statute and in civil proceedings. While Collier J’s decision is another step toward dispensing with this issue in Australia, we will have to wait a little longer for a conclusive ruling on this important question.
