Cryptoassets, cryptoliabilities: bitcoin and insolvency

Much ink has been spilt of late, including in the pages of the South Square Digest1, on the legal nature and aspects of cryptoassets. The tempo of academic and practitioner interest in these issues has quickened in recent months, as questions previously confined to discussion in academic journals and FCA Discussion Papers have begun to spill over into the Courts.

In March of this year Simon Thorley IJ gave judgment in the Singapore International Commercial Court in B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 03, holding that a company operating a cryptocurrency exchange platform (Quoine) acted in breach of contract and in breach of trust when it unilaterally reversed trades for the sale of Ethereum for Bitcoin. Over the summer the High Court in London (Robertson v Person Unknown) granted, pending trial of the claim, an asset preservation order over bitcoin worth more than £1m which had apparently been stolen by fraudsters.

The legal aspects of cryptocurrencies have also garnered significant extrajudicial attention, Mr Justice Zacaroli having delivered a speech only last month to the Insolvency (see pages 5359 of this edition) Lawyers’ Association on the subject of cryptocurrencies and insolvency. As the Learned Judge noted in that speech, the UK Jurisdiction Taskforce – under the chairmanship of the Chancellor of the High Court – is imminently to publish a “Legal Statement” on the legal status of crypto-assets and smart contracts, with a view to providing a degree of clarity around some of the fundamental issues, in particular whether the English common law, as it currently stands, is capable of recognising: (i) cryptoassets as a form of personal property; and (ii) the enforceability of smart contracts.

The hope is that this Legal Statement, once issued by the UK Jurisdiction Taskforce, will introduce a welcome counterweight to the uncertainty which currently bedevils this nascent area of English law. Indeed, the spectrum of academic opinion on certain fundamental, threshold questions could hardly be broader:

• Is cryptocurrency personal property? Not a form of personal property (neither a chose in possession nor a chose in action)2 → A new hybrid category of personal property, a “virtual chose in possession3;

• Is cryptocurrency money? Not money (and lacking certain of its fundamental characteristics)4 → Already (or soon to become) a form of money, in all material respects, and therefore property in that sense5.

Against that backdrop the most pressing desideratum, which may well be fulfilled in the context of the ongoing proceedings in Robertson v Person Unknown, is some decided case law on these fundamental points6. Lord Mansfield’s words on the law of barratry7 in Vallejo v Wheeler (1774) 1 Cowp 143, 153, are equally applicable today in the context of fintech law generally (and the legal nature and status of cryptoassets in particular): “In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other. Because speculators in trade then know what ground to go upon.”

In this article I propose to venture a little further down the rabbit hole, going beyond these threshold questions (e.g. Is a cryptoasset capable of being personal property under existing common law principles?) to consider two topics which are apt to arise in the insolvency/ bankruptcy context, specifically: (i) the getting in of an insolvent’s bitcoin by the officeholder and the avoidance of misapplied or misappropriated bitcoin; and (ii) whether a “debt” owed in bitcoin is a “debt” for a “liquidated sum” such that it can found a statutory demand.

The selection of these topics is necessarily arbitrary to some extent – the area is rich with interesting and knotty questions – but the two topics addressed here have been selected on the basis that they may be of some practical interest to practitioners with clients trading in (or otherwise exposed to) cryptocurrency.


What is a "bitcoin" and is it property/ money?

First, however, some words on these threshold questions concerning the nature and correct legal characterisation of a holding of bitcoin: Bitcoin, first developed in 2008, is generally considered to be the first cryptoasset. It is also by some way the largest and most significant cryptocurrency by market capitalisation. Given that Bitcoin is in a sense the archetypal cryptoasset, the rest of this article considers bitcoin in particular (rather than cryptoassets or cryptocurrencies generally). However, it is important to emphasise that different cryptoassets vary significantly in fundamental respects, including in relation to the “distributed ledger technology” underpinning them (which itself varies considerably across different types of cryptoasset). For this reason, it is important to emphasise that a proposition of law which may be correct in the context of bitcoin may not hold true in the context of other cryptoassets.

So what is Bitcoin/a bitcoin? First, one must draw a distinction between the application and the system: The cryptocurrency application (“bitcoins”) exists on a public, decentralised crypotocurrency system (“Bitcoin”). Transactions involving bitcoins are effected on a public, timestamped ledger or chain of digital signatures (the blockchain), whereby each transaction (or block) is added to the series of all previous transactions (or chain). The technology by which blocks are added to the chain is called a “distributed ledger technology” (or DLT), whereby the ledger, rather than existing in a single physical form under the custodianship of an intermediary, exists in as many copies as there are participants in the Bitcoin system (i.e. a distributed or diffuse ledger as opposed to a single centralised ledger). In this way:

• If the ledger changes then it changes across all of its copies at the same time, with each participant able to verify independently the validity of a change to the ledger. The ledger is changed in this way when a bitcoin is transferred from one participant to another, i.e. when a “block” is added to the “chain”.

• A block is added to the chain (and a bitcoin holding transferred from one participant to another) when the transferor combines its “public key” with its “private key”. The public key (a long string of numbers) is visible to and known by all participants in the Bitcoin system. The private key (a long string of numbers and letters) is known only to the participant.

• All that is visible to the participants in the Bitcoin system are the public keys to which particular bitcoins are attached and one sees nothing identifying the person to whom a public key belongs. Moreover, if a participant loses the private key to which his or her public key corresponds, then the bitcoin attached to that public key is lost with it.

• Accordingly, if a thief steals the piece of paper or hard drive on which your private key is written, then that thief can transfer your bitcoin to another public key as readily as you could and no other participant in the Bitcoin system will be able to infer from the information encoded in the blockchain that there is anything untoward or improper about the transfer.

• However, whilst the private key is the instrument by which possession and control may be exercised over a bitcoin, it would be a mistake to confuse the private key itself with the “thing” which constitutes the bitcoin8. As Mr Justice Zacaroli has observed in his recent ILA speech: “a bitcoin is an entirely imaginary thing: it is the concept which users in the system treat as being transferred from one public address to another when a block is successfully added to the chain recording that the transfer has taken place… But a block added to a chain on a digital system is of no actual use to anybody. It has value only because sufficient users of the system believe that it does. But that (as I have explained) is not so different from many fiat currencies: as demonstrated at moments of financial crises by runs on banks and runaway inflation.”

• Having described these features of the Bitcoin system (and the mechanism for transferring a bitcoin from one participant in that system to another), I shall not dwell on questions concerning what sort of right a person “holding” a bitcoin has thereby acquired. This is a topic likely to be elucidated in the forthcoming report of the UK Jurisdiction Taskforce – and perhaps also by the High Court in the ongoing proceedings in Robertson v Person Unknown. However, suffice it to say the following for present purposes:

• A bitcoin cannot be a chose in action, not least because a holding of bitcoin gives the holder no rights against any other person. • A bitcoin is not a chose in possession because, in the absence of statutory intervention (e.g. regulation 3(2) of the Financial Collateral Arrangements (No.2) Regulations SI 2003/226, as amended), one cannot take possession of an intangible (such as a block added to a chain on a digital system): see OBG v Allan [2007] UKHL 21.

• The difficulty the two bullet points above pose is that, at least at Court of Appeal level, it is settled law that choses in action and choses in possession are the only two categories of personal property: see Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281.

• That said, this problem does not mean that a holding of bitcoin cannot, in principle, be a type of personal property at common law. As Gullifer/Sarra have pointed out9, the appellate courts may well be attracted to the analysis that a holding of cryptocurrency such as bitcoin falls within Lord Bridge’s suggested third category of “other intangible property” into which things like export quotas might fall (see Privy Council’s decision in Attorney General of Hong Kong v Nai-Keung [1987] 1 WLR 1339, 1342), a category extended (obiter) by the High Court to include an EU carbon trading allowance (Armstrong DLW GmbH v Winnington Networks Ltd [2012] EWHC 10 (Ch), at [61])). It may be that this hybrid new third category of person property will be most aptly described as a “virtual chose in possession”, noting that it shares certain features in common with the traditional chose in possession (for example that, unlike a chose in action, it can be lost)10, albeit not all of them. The precise characterisation adopted by the Court will matter (in particular as to which features of the existing categories of personal property this new category will have), given that (for example) an action in conversion only arises in the context of a chose in possession and not a chose in action11.

Getting in an insolvent company’s bitcoin and bitcoin transaction avoidance

Whilst it remains unclear whether (and if so on what basis) the English court will recognise a holding of bitcoins as personal property at common law, nonetheless it is tolerably clear (although there is no authority on point) that, in the insolvency context at least, the English court would recognise a holding of bitcoin as falling within the concept of “property” as defined in section 436 of the Insolvency Act 1986, specifically: “money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property”. As to this:

• The question whether a holding of bitcoin is personal property as a matter of common law is plainly relevant but not determinative in this context.

• One notes in particular that this statutory definition of “property”, being very widely drafted, appears apt to extend to (i) a bankrupt’s possession/control (or entitlement to call for possession/control) over a private key and (ii) the value which that private key can unlock12.

• This statutory definition of “property” is a fundamentally pragmatic one, driven by the question of the realisation of value for creditors. Accordingly, as Mr Justice Zacaroli concluded in his recent speech to the ILA, there is “little doubt” that the English Court will find that a holding of bitcoin will fall within the definition of “property” provided by section 436 of the 1986 Act13.

It follows that the liquidator’s duty to “secure that the assets of the company are got in, realised and distributed” (section 143(1) of the 1986 Act) and to take custody of “all the property and things in action to which the company is or appears to be entitled” (section 144(1) of the 1986 Act), as well as the administrator’s power to “take possession of, collect and get in the property of the company” (paragraph 1 of the Schedule 1 to the 1986 Act), include the duty/power to get in and realise any bitcoin which the insolvent company holds or to which it is entitled14.

By the same token, the liquidator/administrator will be able to avail himself or herself of the powers under section 236 of the 1986 Act, which include the ability to apply to Court for an order summoning “any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company” (s.236(2)(c)) to give “an account of his dealings with the company or to produce any books, papers or other records in his possession or under his control relating to the company or the matters mentioned in paragraph (c) of the subsection” (s.236(3)), with a view to compelling the production of information concerning the company’s property – for example, the existence of a holding of bitcoin and the private key to that holding. Importantly, noting that the private key is (per se) just a string of letters and numbers (which may be recorded on any form of physical or other medium), the relief available under s.236(3) is not limited to the compelled production of books, papers or other records, but extends to the giving of an “account” (i.e. the provision of the information per se). Again, the Court’s focus here should be on the utility of the information sought for the purpose of realising value for the company’s creditors. Accordingly, it is difficult to imagine the Court entertaining any argument from a recalcitrant director (or other person declining to disclose the details or private key relating to a company’s bitcoin holding) that a private key is not “information” relating to “property” for the purposes of s.236..

Of course, a key practical issue IPs are likely to face in this context is the unlawful dissipation/ misappropriation of a debtor’s bitcoin, whether this be (i) at the debtor’s instigation (e.g. apreference, a transaction at an undervalue, a transaction defrauding creditors) or (ii) against the debtor’s will (hacking or the theft of the physical medium on which a private key is held). The law’s solution to these forms of unlawful dissipation/ misappropriation is that the transactions in question will be voidable or (for example in the case of theft or a transfer of bitcoin in breach of s.127 of the 1986 Act) void ab initio. However, this solution gives rise to further questions of its own, in particular given the following practical issues: (i) the irreversibility of a transfer of bitcoin (i.e. the addition of a block to the chain); (ii) the anonymity of participants in the Bitcoin system; and (iii) the possibility of the mixing and splitting15 of bitcoin holdings with a view to obscuring the transactional history of stolen or unlawfully dissipated bitcoins. As to this:

• The issues raised by (iii) – i.e. mixing, splitting and the obscuring of bitcoin transaction histories – require one to take a view as to the exact nature of bitcoin as “personal property” at common law (i.e. rather than as “property” for the purposes of the 1986 Act), which, once answered in a particular way, will in turn suggest the correct formulation of subsequent questions regarding the availability of tracingbased remedies, the applicability of the rule in Clayton’s Case and so forth. These issues are beyond the scope of the present article16.

• The issues raised by (ii) – i.e. the anonymity of participants in the Bitcoin system – take one back to the question considered above as to the scope of the officeholder’s powers of investigation, in particular under s.236 of the 1986 Act. The anonymity implicit in the Bitcoin system can be overstated, noting that blockchain cluster analysis can establish the possibility/probability of particular public keys being connected with particular real-world persons17. However, as Fox and Green have noted, “[even] if the transactional history of a crypto-coin is traceable, evidence extrinsic to the blockchain would be needed to identify the people in the real world who control the public keys recorded on it.”18 In this context the powers under s.236 of the 1986 Act are the officeholder’s best bet in terms of ascertaining the appropriate Defendants to any claim.

• As to (i), i.e. the irreversibility / immutability of the bitcoin transaction: It is important, in this context, to note that the blockchain record (immutable though it is as a matter of fact) cannot be the thing which is per se constitutive of a person’s title19 to particular bitcoins (which is a question of law). If A hacks or otherwise steals B’s private key and uses B’s private key without B’s consent to transfer B’s bitcoins to A, then A’s title to those bitcoins, notwithstanding the information encoded on the blockchain, will be void at law and in equity20. Similarly, if A obtains bitcoin from B as a consequence of a fraudulent misrepresentation made by A to B, then A’s title will be voidable21. As Fox and Green note: “Cyber-currency systems could only opt out of the general rules of property law if all users of the system agreed to dis-apply them. There would need to be a system-rule to this effect, which users accepted when they made transactions on the system. Only then could the blockchain record be constitutive of a person’s title to the coins.”22 The same analysis applies a fortiori in relation to transactions which are void or voidable under the insolvency legislation, something which cannot be contracted out of even in principle.

• Once a transfer of bitcoin has been held to be void or has been set aside by the Court, the question will then arise as to what, as a matter of practicality, can be done in order to vindicate the insolvent’s title to the misappropriated or unlawfully dissipated bitcoins – at which point the officeholder may well need to grapple with points (ii) and (iii) referred to in the bullet-points above. However, as regards the relatively simple case of an action by B (the bankruptcy trustee/insolvent company) against A (the recipient of B’s bitcoin pursuant to a void or avoided transaction), there is no reason in principle why the officeholder could not seek the usual remedies, whether the transfer in question is void/voidable under the insolvency legislation or at common law/ in equity. For example, if the Court finds that an insolvent company’s transfer of bitcoin amounts to a preference or a transaction at an undervalue then, notwithstanding the practical impossibility of reversing that transaction as such, it could nonetheless declare that the transaction was a preference and grant an order under s.241(1)(d) of the 1986 Act requiring A “to pay, in respect of benefits received by him from the company, such sums to the office-holder as the court may direct”. Indeed, although a transfer of bitcoin is irreversible and immutable (a block cannot be removed from the chain once it has been added), nonetheless a particular misappropriated or misapplied bitcoin is in principle identifiable in the “hands” (i.e. public key) of its “recipient” (i.e. holder of that public key)23; and, once a particular bitcoin has been so identified, it would be open to the Court to grant an order under section 241(1)(a) of the 1986 Act requiring the property unlawfully transferred from B to A (i.e. that particular bitcoin) “to be vested in the company” (i.e. transferred back to B’s public key).

In summary, then, whilst clarification from the Court as to the nature and status of a bitcoin holding as “personal property” at common law is sorely needed, nonetheless it is tolerably clear: (i) that a bitcoin holding is in any event “property” for the purposes of the insolvency legislation, if and insofar as it has a value which can be realised for the benefit of the insolvent’s creditors; and (ii) that, notwithstanding the practical problems an officeholder may face in seeking to realise a insolvent’s bitcoin holding and/or to avoid voidable transfers of the insolvent’s bitcoin to third parties (particularly insofar as the irreversibility of transactions and the anonymity of Bitcoin participants are concerned), nonetheless these practical problems are not, at least in principle, a bar to obtaining appropriate relief against third-party recipients of misappropriated/misapplied bitcoin.

Standing to petition for bankruptcy/ winding-up

Question: If (i) X provides goods to Y pursuant to a contract providing that in consideration of the provision of those goods Y shall pay 3 bitcoin to X, and (ii) Y cannot or declines to pay 3 bitcoin to X, is X able to serve a valid and effective statutory demand on Y in respect of the unpaid 3 bitcoin with a view to presenting a bankruptcy petition against Y? A creditor’s bankruptcy petition must be presented “in respect of one or more debts owed by the debtor, and the petitioning creditor or each of the petitioning creditors must be a person to whom the debt or (as the case may be) at least one of the debts is owed” (s.267(1) of the 1986 Act) and it may be presented only if (relevantly): (a) the amount of the debt, or the aggregate amount of the debts, is equal to or exceeds the bankruptcy level; (b) the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured; and (c) the debt, or each of the debts, is a debt which the debtor appears either to be unable to pay or to have no reasonable prospect of being able to pay (s.267(2) of the 1986 Act). For the purposes of (c), the debtor appears to be unable to pay a debt if, but only if, the debt is payable immediately and (relevantly) “the petitioning creditor to whom the debt is owed has served on the debtor a demand (known as “the statutory demand”) in the prescribed form requiring him to pay the debt or to secure or compound for it to the satisfaction of the creditor, at least three weeks have elapsed since the demand was served and the demand has been neither complied with nor set aside in accordance with the rules” (s.268(1)(a) of the 1986 Act). Now, for present purposes it is right to proceed on the assumption that the Court will not recognise bitcoin (or other virtual currency) as equivalent to a fiat currency like GBP or USD. There are good reasons to make this assumption: Sensible arguments can be made that a virtual currency like bitcoin is identical or proximate to a fiat currency insofar as it operates as (i) a medium of exchange, (ii) a store of value (albeit query the stability of the value) and (iii) a unit of account. However, the classic definitions of fiat currency stipulate that the medium must also be: (a) issued under the authority of the law in force within the State of issue; (b) under the terms of that law, denominated by reference to a unit of account; and (c) under the terms of that law, to serve as the universal means of exchange in the State of issue24. As Fox and Green note, it is “this divorce between currency and State… which seems at the moment to be the most likely reason why virtual currencies would not fit within any existing category of ‘money’”25.

Against that backdrop, the question at hand turns on whether an “amount” of bitcoin “owed” by Y to X is a “debt” for a “liquidated sum” for the purposes of s.267(2)(b) of the 1986 Act. As to this: • The concept of a “debt” for a “liquidated sum” is not limited to a debt claim for a specific sum of money. • In particular, it may also extend to a sum owing under a liquidated damages clause. See McGuinness v Norwich and Peterborough Building Society [2011] EWCA Civ 1286, at [37]: “The most obvious use of the term “liquidated” has been in relation to liquidated damages. “Liquidated” has been defined judicially as meaning the sum which the parties have by their contract assessed as the damages to be paid for its breach: see Wallis v Smith (1882) 21 Ch D 243 at 267 per Cotton LJ. If a genuine pre-estimate of loss the provision is enforceable according to its terms. I would therefore regard a claim for liquidated damages as one for a liquidated sum within the meaning of s.267 unless a claim in damages is excluded by the use of the word “debt”.” • The touchstone test is not whether the measure of liability is readily calculable under the terms of the contract, but whether a specific sum is envisaged under the terms of the contract as being payable to the creditor. See, for example, Ex p. Broadhurst (1832) 22 LJ Bank 21, a partnership case, where Maule J concluded that a covenant to pay “the difference between the debts due from the old firm stated in the schedule and any further debts” was not a covenant to pay a liquidated sum (or indeed any sum). As Patten LJ put it in McGuinness v Norwich and Peterborough Building Society at [36], in support of the conclusion that the liability under a guarantee of the “see to it” type would not constitute a “debt” for a “liquidated sum”, what one is looking for is “a pre-ascertained liability under the agreement which gives rise to it. This can include a contractual liability where the amount due is to be ascertained in accordance with a contractual formula or contractual machinery which, when operated, will produce a figure.”

• Now, proceeding on the basis that bitcoin is not money per se (for the reasons explained above), the better view is that a claim for a specific amount of bitcoin is not a “debt” for a “liquidated sum” (for the purposes of founding a statutory demand). As to this:

• First, the right under a contract to receive a specific amount of bitcoin does not, absent a contractual provision for the calculation of a liquidated claim expressed in a fiat currency in lieu of bitcoin, give rise to a right to a specific sum of money. As Fox and Green observe the holder of a bitcoin, despite the existence of “exchange rates” as between bitcoin and various fiat currencies, has no automatic right to exchange his or her bitcoin for an amount of fiat currency – only a power to do so26. Indeed, this makes a holding of bitcoin distinguishable from (and further removed from a fiat currency than) the forms of ‘money’ issued by certain local communities or traders (e.g. ‘Brixton money’ or ‘Bristol money’): “payment using ‘money’ issued by local communities or traders, such as the Brixton pound in London, may constitute money for the purposes of a sale contract where the scheme gives holders of the notes the right to exchange them for legal tender and in so far as a holder of such a note uses it to pay for goods” (emphasis added)27. Accordingly, an obligation to “pay” a specific amount of bitcoin does not, without more, carry with it a pre-ascertained liability which can be expressed in terms of a specific sum of money. For this reason the better view is that an obligation to pay a specific number of bitcoin does not, without more, amount to a “debt” for a “liquidated sum” for the purposes of establishing a right to issue a statutory demand.

• Indeed, the better view is that a contract for goods in exchange for bitcoin is not a contract for the “sale” of goods at all, but rather a contract for exchange or barter (therefore falling outside the Sale of Goods Act legislation). As Fox and Green observe28, the “principal consequence for a disappointed seller, having agreed to accept Bitcoin, would seem to be remedial, since she thereby loses the ability to sue for the price. This denies the seller the ability to enforce the primary obligation, and its corresponding advantages: debt claims are not discretionary, nor are they subject to the common law constraints of remoteness, mitigation, or penalties, and it is both procedurally and substantively easier for debt claimants to obtain summary judgment.” To this one might add that the “seller” of goods for bitcoin also lacks that other advantage of being owed a debt for a liquidated sum, namely the ability to petition for the buyer’s bankruptcy.

• Finally, for the avoidance of doubt it is important to emphasise that, whilst the better view is that a “debt” owed to a seller (or other contractual counterparty) “payable” in bitcoin cannot found a valid statutory demand (absent a contractual provision for the calculation of a liquidated claim expressed in a fiat currency in lieu of bitcoin), this does not mean that such a “debt” would not be provable in a bankruptcy or liquidation/administration, noting that the relevant definitions in this context (see in particular s.382 of the 1986 Act and rule 14.1(3) of the 2016 Rules) are much broader and not limited to debts for liquidated sums.

The analysis above illustrates the limitations inherent in the use of a virtual currency as a medium of exchange for real-world goods and services. Depending on the industry and sector in question the advantages of using a virtual currency, in particular the confidential, opaque and disintermediated nature of such transactions, may well be considerable. However, any such advantages come at the expense of losing many of the upsides of trading in fiat currencies, not least the ability to petition for the defaulting counterparty’s bankruptcy.

1See Robert Amey’s article on page 14 of Digest July 2019 Edition.

2Quest, “Taking security over bitcoins and other virtual currency” [2015] 7 JIBFL, 401, 402: “English law concepts of property cannot therefore easily be applied to bitcoins.”

3Perkins and Enwezor, ‘The Legal Aspect of Virtual Currencies, Perkins and Enwezor’ [2016] 10 JIBFL 569, 570: “With this attribute of sharing certain characteristics of both intangible property and choses in possession, it may be convenient to understand virtual currencies – where the currency is economically robust enough to be classed as “property” – as a kind of hybrid: “virtual choses in possession”. That is, intangible property with the essential characteristics of choses in possession.”

4See the report of the UK Cryptoasset Taskforce (comprising representatives of the Treasury, the Bank of England and the FCA) (October 2018), at §2.13: “While cryptoassets can be used as a means of exchange, they are not considered to be a currency or money, as both the Bank of England and the G20 Finance Ministers and Central Bank Governors have previously set out.11 They are too volatile to be a good store of value, they are not widely-accepted as means of exchange, and they are not used as a unit of account.”

5Yeo and Farmer, ‘Mapping the landscape: cryptocurrency disputes under English law (Part 1)’ [2019] 2 JIBFL 80, 81: “The total quantity of cryptocurrencies presently in circulation is so small compared to cash and instantly available cash-like money, and the (legitimate) opportunities to use payment tokens for the purposes of a currency are presently so limited, that it is unlikely in the near future that any particular payment token will function as money to a sufficient extent to be so classified. But if and when such a point is reached then those tokens will also be regarded as “property” on the basis that “money” is clearly “property”.”

6Indeed, even the decision of Simon Thorley IJ in B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 03 provides only limited assistance in this regard, given that Bitcoin’s status as some form of property went by way of concession in that case: “Whilst there may be some academic debate as to the precise nature of the property right, in the light of the fact that Quoine does not seek to dispute that they may be treated as property in a generic sense, I need not consider the question further.” (at [142]).

7A fraud or “knavery” in the master or mariners of a ship, by which the owners or freighters are injured.

8In any event it is unlikely that the common law would consider the private key itself (i.e. mere information: a series of numbers and letters) as “property”. See Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281, at [42]: “Although information may give rise to intellectual property rights, such as database right and copyright, the law has been reluctant to treat information itself as property. When information is created and recorded there are sharp distinctions between the information itself, the physical medium on which the information is recorded and the rights to which the information gives rise. Whilst the physical medium and the rights are treated as property, the information itself has never been.”

9Sarra and Gullifer, “Cryptoclaimants and bitcoin bankruptcy: Challenges for recognition and realization”, International Insolvency Review, 2019;28:233-372, 245.

10See fn.3 above.

11See further L. Chambers, “Misappropriation of cryptocurrency: propelling English private law into the digital age?” [2016] BJIBFL (May), 263, 263-4.

12See Patel v Jones [2001] PLR 217, [39] (emphasis added): “the statutory objective of the provisions of the 1986 Act [is] that, subject to certain specified exceptions, all a debtor’s property capable of realisation should be vested in the trustee for him to realise and the proceeds among the creditors.”

13A view echoed in, for example, Sarra and Gullifer (op. cit.), 252.

14There are likely to be complex issues arising from the custodian relationship obtaining in the context of insolvent companies/individuals who use intermediaries to hold bitcoin, in particular as to who is the true owner of the legal and/or beneficial title to the bitcoin. This is likely to turn, to a large extent, on the terms governing the custodian relationship. For further discussion, see Sarra and Gullifer (op. cit.), §4.2.

15For a description of these processes of mixing and splitting, and a consideration of the legal consequences of those processes, see David Fox and Sarah Green, Cryptocurrencies in Public and Private Law (OUP 2019), §§6.67-96.

16But see Fox and Green (op. cit. fn.15), §§6.67-96, for an excellent introduction to these issues.

17See Sarah Meiklejohn and others, ‘A fistful of Bitcoins: Characterizing Payments among Men with No Names’ (December 2013), the Advanced Computing Systems Association https://cseweb.ucsd. edu/~smeiklejohn/files/ imc13.pdf , accessed 4 November 2019.

18Fox and Green (op. cit. fn.15), §6.78.

19I assume, for present purposes, that a holding of bitcoin is a species of personal property at common law.

20Clarke v Shee (1774) 1 Cowp 197 (common law) and Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, 715-6, per Lord Browne-Wilkinson (equity).

21Shalson v Russo [2005] Ch 281.

22Fox and Green (op. cit. fn.15), §6.49.

23Fox and Green (op. cit. fn.15), §6.52: “Although the blockchain record of transactions cannot be legally constitutive of Bob’s title to the coins at his public key, it must be the best evidence of it. If Carol seeks to allege that the 5 BTC at Bob’s pk8 are the proceeds of a fraud or theft then, if all other things are equal, the burden is on her to prove it by challenging Bob’s title.”

24Charles Proctor, Mann on the Legal Aspect of Money (7th ed., OUP 2012), §1.17; Fox and Green (op. cit., fn. 15 above), §2.10.

25Op. cit., §2.10.

26Op. cit., §§2.31-33. See also P Carl Mullan, The Digital Currency Challenge (Palgrave 2014), 10: “When determining the value behind a digital currency unit, the linchpin of this equation is the point where digital units are swapped for national currency.”

27Michael Bridge, The Sale of Goods (2nd ed., OUP 2009), §1.034, n.233.

28Op. cit. §§2.42-43.

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