AUSTRALIA Law and Practice Contributed by: Joachim Delaney and Ranjani Sundar, HFW
7.3 Crypto-Assets Classification as “Property”
Freezing Orders Australian courts have granted freezing orders in respect of cryptocurrency, where there is a real risk that the cryptocurrency may be destroyed, resulting in the diminution of its value. For instance, in Chen v Blockchain Global LtdAbel v Blockchain Global Limited (2022) VSC 92, the court referred to freez - ing orders having been made over all the defendant’s assets, including a digital wallet holding Bitcoin. In granting the freezing order, the court considered that there was a serious question to be tried in relation to whether or not the defendant had defrauded the plaintiffs. Additionally, the court considered that the prospective destruction of the Bitcoin would vitiate a final judgment. In Australian Securities and Investments Commission (ASIC) v A One Multi Services Pty Ltd [2021] FCA 1297, Derrington J of the Federal Court considered that since cryptocurrency is extremely liquid and eas - ily transferrable, the assets may be dissipated in a manner that is difficult to trace, unless an individual with the power of a receiver is appointed to recover them. Fraud Involving Crypto-Assets The volatility of the value of cryptocurrency hinders the ability to trace its value in cases of fraud, as it may not be possible to maintain records identifying the fundamental value of the cryptocurrency. Nonetheless, there are Commonwealth laws which impose mandatory reporting obligations in relation to suspicious transfers of cryptocurrency. The legal sta - tus of a “Digital Currency Exchange Register” within Sections 5 and 76B of the AML/CTF Act means that the exchange and transfer of cryptocurrency is sub - ject to the Anti‑Money Laundering/Counter‑Terrorism Financing Rules Instrument 2007 (No 1) (Cth) (the “AML/CTF Rules”), which was created pursuant to Section 229 of the AML/CTF Act. For instance, under Section 41 (2) of the AML/CTF Act, a reporting entity is required to report suspicious matters to the Australian Transaction Reports and Analysis Centre. Additionally, Rule 18.2 of the AML/CTF Rules stipulates the content that is required to be included in a suspicious matter report that involves digital currency.
There has yet to be an Australian court decision that classifies crypto-assets as constituting “property”. Nonetheless, crypto-assets are legally recognised under Australian taxation laws and company laws. For instance, ASIC considers that the legal status of cryptocurrency is influenced by the structure of the Initial Coin Offering (ICO), and the rights that attach to the tokens. Consequently, tokens of cryptocurrency may be regarded as “financial product(s)” under the Corporations Act 2001 (Cth), such as in the form of managed investment schemes, securities and deriva - tives. The implications of this classification are that the cryptocurrency will be subject to disclosure, regis - tration, licensing and conduct obligations as required under the Corporations Act 2001 (Cth). For income tax purposes, the Australian Tax Office views Bitcoin and analogous cryptocurrencies as assets, which can be held or traded. For instance, an isolated transaction involving the sale of cryptocur - rency may result in the cryptocurrency being treated as a capital gains tax asset. Meanwhile, a state district court has held that a cryp - tocurrency investment account is sufficiently secure to constitute an investment for the purposes of secu - rity for legal costs ( Hague v Cordiner (No 2) [2020] NSWDC 23). This court considered that the volatility of cryptocurrency could be addressed by requiring the claimant to notify the defendant’s solicitors of any drop below the secured amount. The Supreme Court of Victoria in Blockchain Tech Pty Ltd [2024] VSC 690, established that an interest in cryptocurrency (in this case Bitcoin) is characterised as an interest in property under Australian law ([383]– [389]). Ultimately, the court found that some of the Bitcoin were the subject of an express trust which was breached, entitling Blockchain Tech to equitable com - pensation. This decision brought Australian law in line with other common law jurisdictions, such as the UK, New Zealand and Singapore, which have recognised cryptocurrencies as property ([372]).
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