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Cryptocurrency as property: Australian Court allows cryptocurrency as security for costs
An Australian Court has spearheaded the treatment of cryptocurrency as property in relation to financial disputes. In Hague v Cordiner (No. 2) [2020] NSWDC 23, the New South Wales District Court approved the claimant’s cryptocurrency investment account as security for costs.
To recap some basic commercial litigation principles:
- Following judgment, the unsuccessful party in litigation is normally ordered to pay the legal costs of the successful party.
- Where there is concern about a claimant’s capacity to pay legal costs, a defendant will usually (at the outset of the litigation) bring an application seeking that the claimant pay a certain amount of money into a trust account (normally the Court’s) which will be held until the end of the litigation.
- This is known as “security for costs” and ensures that if a costs order is made in favour of the defendant, the payment of those costs (or part of the costs) is secured.
- As noted above, the security is normally a payment into a trust account or, sometimes, a bank guarantee.
In this case, the claimant proposed that his cryptocurrency reserves (which were held by the digital currency exchange, BTC Markets) be treated as the security (i.e. without requiring payment into Court). While this was opposed by the defendant, on the basis that it was a “highly unstable form of investment”, the judge allowed the crypto account as security.
This decision (albeit from a lower Australian Court) is encouraging and gives further strength to the argument that cryptocurrency is indeed property. Further, the Judge took a sensible approach to dealing with the undoubted volatility of digital currency by requiring the claimant to: (1) notify the defendant’s solicitors (within 24 hours) when the balance of the digital reserves dropped below the amount of the security; and (2) provide periodic bank statements to the defendant’s solicitors.
http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/nsw/NSWDC/2020/23.html
12 March 2020
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Anna
BattamsAssociate
Specialising in Banking & financial disputes, Commercial arbitration, Commercial disputes and Financial regulatory
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