The Law of Cryptoassets is the Law of the Horse

Akshaya Kamalnath, The ANU College of Law

The facts of Ruscoe and Moore v Cryptopia Limited (In Liquidation) [2020] NZHC 728 might not be as racy as those of Quadriga, but nevertheless gave rise to novel questions. The High Court of New Zealand had to decide an interesting question about whether cryptocurrency traded on the exchange in question have the legal status of property. If yes, there was also a subsequent question about whether such property is capable of being the subject matter of a trust. The court decided in the affirmative with regard to both these questions. In a case comment published in the Banking & Finance Law Review, I focused on the former issue and some implications for the treatment of cryptocurrency in insolvency law.

On the question of the legal status of the cryptoassets in this case, the court held that they were “a species of intangible personal property and clearly an identifiable thing of value.” The decision is not only significant because there had been no clear determination of whether cryptocurrency is property before this decision, but also because of the basis of the court’s reasoning.

Justice Gendall referred to a few cases outside New Zealand which rendered decision on issues of cryptocurrencies even if they did not deal with the exact question addressed in this case. He also referred to a few decisions in New Zealand where the definition of property was considered in the context of CCTV footage and digital files. In the final determination, he mostly relies on Lord Wilberforce’s definition of property in the case of National Provincial Bank Ltd v Ainsworth National Provincial Bank Ltd v Ainsworth, [1965] AC 1175 (HL) at 1247–1248. That case defined property as a right or interest which is ‘definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability’. Justice Gendall assessed that cryptocurrency satisfied this definition. This reliance on established common law principles of property ultimately tells us that new technologies including cryptocurrency can be assessed within fundamental principles of law. The law of the horse is the law of cryptocurrency!

From an insolvency perspective, while it is helpful to have certainty about the legal status of cryptoassets, what Ruscoe did not deal with (because the facts did not require this) was how cryptoassets should be handled in a liquidation. Although it has been determined that they have the legal status of property, the high volatility of cryptoassets would mean that processes like asset sales within a liquidation must be re-examined.

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