Traditional currency (i.e. a formalized medium of value and exchange, in the form of paper or metal money, issued by governments) is a form of property at common law. There may be a dispute as to whether it is tangible, or intangible, property-but it is definitely a form of personal property. As such it can be owned, possessed and otherwise dealt with as property.
The recent rise in popularity of Bitcoin and other cryptocurrency (i.e. a digital/virtual/electronic medium of value and exchange, not issued by a government) has raised some novel legal questions. Among them is the query: is cryptocurrency property? This arose recently before the Supreme Court of British Columbia in Copytrack Pte Ltd. V. Brian Wall.
The plaintiff at issue had created and offered for sale its own cryptocurrency known as “CPY Tokens”. The defendant had agreed to purchase 530 tokens as an investment.
In February of 2018 Copytrack mistakenly transferred 530 “Ether Tokens” to the defendant’s cryptocurrency wallet. This was a big mistake. The “CPY Tokens” were worth $780.00 Canadian dollars, whereas the erroneously transferred “Ether Tokens” were worth $495,000 Canadian dollars.
Almost immediately Copytrack contacted the defendant and asked for the return of the more valuable tokens. He agreed to do so the next day and was given the relevant cryptocurrency address to complete the transfer. The defendant claimed, ten days later, that his wallet had been wrongfully accessed by unknown third parties who had taken the “Ether Tokens” . He claimed that, as he no longer had control of the tokens, he could not return them.
Copytrack wasted no time in bringing an action for the return of the tokens claiming, among other causes of action, that the tokens had been wrongfully converted or retained. The compay brought a motion for summary judgement on these causes of action alone i.e. for conversion and detinue.
Conversion is an intentional tort whereby the defendant takes another’s personal property and treats it as if they were the owner. In common parlance it is theft.
Detinue is a remedy in tort to recover the wrongful taking of personal property. It is brought by the person claiming to be the real owner.
Cryptocurrency as Property
Both of the causes of action advanced by Copytrack required, as one of their essential elements, the loss of property. The central problem, therefore, became whether cryptocurrency was property.
Copytrack’s initial submissions assumed that cryptocurrencies were goods (i.e. personal and tangible property). The defendant rebutted this suggesting that the characterization in law of cryptocurrencies had not yet been made in any reported decision. These issues, he suggested, could not be determined on a motion for summary judgement.
The property issue was only briefly argued at the hearing of the motion. The judge felt it was a critical matter to be determined and would have dismissed the motion for the failure of Copytrack to adequately address it. However, the defendant died the day after the hearing of the motion. The judge felt that although the death did not impact the claims, there would be no real point in having a trial when the defence could no longer raise any different evidence. Accordingly, the judge asked the parties for further submissions on the property question and the availability of the torts of conversion and detinue.
Copytrack responded by citing Li v Li a decision of the BCSC in which it was found that “funds” (money) may be subject to a claim in conversion. Money is however tangible and clearly property. They further submitted that whether property or not, cryptocurrency had the following characteristics:
- They are capable of being possessed, stored, transferred, lost and stolen;
- They were, at the time the conversion and wrongful detention began, held in the Wall Wallet;
- They are specifically identifiable and have been traced to five wallets in which they are currently being held; and
- They can be used as a medium of exchange, a store of value, and a unit of account, like funds or currency.
Conclusion (Sort of)
In the end, the judge felt that the proper characterization of cryptocurrency was a central issue to the case. After commenting on a dictionary definition suggesting that cryptocurrency was not a good, he concluded that the evidentiary record was insufficient to decide the issue, especially on a motion for summary judgement.
Then, in an apparent turnaround, he found that a remedy was appropriate because the tokens were clearly the property of Copytrack and that the defendant had no proprietary claim to them. He then granted Copytrack the right to trace the tokens and recover them.
The issue of the characterization of cryptocurrency remains to be decided. It appears likely that it will be found to be property much like any chose in action like a promissory note.
If you have questions about this decision, about how courts have been responding to disputes involving cryptocurrency, or would like to discuss a business dispute, investment loss dispute, or other issue, contact Milosevic & Associates. We bring our deep knowledge and extensive litigation experience to every file. All of our lawyers are highly skilled litigators. We have conducted trials and appeals at all levels of court, including the Supreme Court of Canada. We are in court or in mediations almost every day and as a result, have become exceptionally adept at thinking on our feet and addressing the unexpected. Over the years we have seen it all and helped our clients mitigate their financial risks. Our results speak for themselves. To learn more about how we can help you call us at 416-916-1387 or contact us online.