Is cryptocurrency property?

Yes. The High Court has recently held that cryptocurrency can be classified as property.

Cryptocurrency is a virtual electronic currency that can be used to make secure payments online by using virtual tokens, or used for investing.

Very few cases involving cryptocurrencies have come before the Courts in New Zealand. However, this case confirmed that cryptocurrencies are property. This will provide guidance across many areas of law on how to deal with it, such as a liquidation, separation, payment for employment, investment and taxation, and asset protection.

Given the similarities in how cryptocurrencies operate, it is likely that in a relationship property setting it could be treated much the same as shares. It is, however yet to be tested by the Court. For more information on how shares are treated in a separation, view our article.

The Court was deciding a case where an online cryptocurrency exchange platform was put into liquidation after being hacked.

In this case the online cryptocurrency exchange platform allowed users to exchange a range of different cryptocurrencies. The platform recently suffered a serious hack whereby a significant amount of cryptocurrency was stolen. This led to the platform’s liquidation.

The liquidators applied the Court for direction, because they were unsure of how the cryptocurrencies should be classified, or how they should be dealt with.

The Court decided that cryptocurrencies are a type of intangible personal property (property that cannot be physically touched), and that they could be considered as property more generally because the purpose of cryptocurrency is used in purchasing of goods or services, and in trading, like shares.

Furthermore, the Court held that cryptocurrency is property because:

• it can be isolated from other assets of the same or different type and therefore be identified;
• the owner of the cryptocurrency is easily recognised, can control it, and exclude others from using it;
• it is potentially desirable to third parties to the extent that they may want to obtain ownership of it (honestly, or dishonestly in the case of a hack); and
• it is relatively permanent and stable (despite the recent hack).

The Court also decided that the cryptocurrencies were capable of being held in trust. Therefore, the platform was holding them on trust for all the account holders rather than the cryptocurrencies being owned outright by the platform.

If you have any issues with how cryptocurrencies are being dealt with it pays to take advice from professionals experienced in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are. At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.