Crypto Law in Australia
Digital assets and cryptos
Research indicates that over one million Australians own crypto. Cryptos are generally regarded as high-risk investments. After shares, cryptos are the second most common type of asset held in Australia
What we mean by Crypto Law is not a specific area of law or specific legislation that regulates everything about the ownership, use and transactions of cryptocurrencies (cryptos) or digital assets.
We mean those existing laws that impact on the ownership, use, sale, purchase, exchange, custody and transfer of cryptos and digital assets.
Digital assets or cryptos as they are sometimes called are treated in Australia as a form of property.
It is not illegal to own and self-custody crypto, or to use crypto as a form of payment if you can find a trader or seller who is prepared to accept payment for a good or service in the form of crypto currencies. There has not to date been a high demand to use cryptos for payments but that is quickly changing due to the adoption of fiat pegged stablecoins.
Since 2017, crypto exchanges have benefitted from the legal status of regulated exchanges that can provide for the legal purchase, sale or swap of cryptos, provided that these crypto exchanges register with Australian Transaction Reports and Analysis Centre (AUSTRAC) and comply with anti-money laundering (AML) and counter terrorism financing (CTF) obligations.
Until recently, the Australian government has adopted a regulatory lite approach to crypto regulation although this is now about to change in a big way. These changes were accelerated over the last few years by several setbacks to consumers from events over the last two years such as the FTX debacle and the collapse of the Luna coin.
Fortunately, Australia has avoided the problems that have occurred in the United States of America from the lack of clarity caused by the previous enforcement heavy actions of the Securities Exchange Commission (SEC) under the previous US Administration which had adopted an aggressive regulation by enforcement approach to the burgeoning crypto market, and the SEC’s failure to engage in rulemaking that would assist market participants in the USA determine whether and in what circumstances a digital asset is a security.
Despite a less aggressive approach by the Australian Securities and Investment Commission (ASIC), the Australian regulator has adopted in recent times a more assertive enforcement approach to participants in the crypto market (see recent cases).
Regulation of Crypto
Although digital assets are not the subject of a specific area of law in Australia, conduct in relation to digital assets has been until now caught by existing regulatory frameworks in Australia. Cryptos are already regulated in part by ASIC, the Australian Taxation Office (ATO) and AUSTRAC.
For example, investments in new crypto currencies to raise funds from the public may attract the operation of Australia’s financial services regulatory regime and crypto-related products will soon fall within the definition of a financial product under the Corporations Act 2001 or the Australian Securities and Investment Commission Act 2021 due to legislation that has passed in the Australian Parliament.
Digital asset exchanges and intermediaries, often called centralised exchanges or CEXs must register with AUSTRAC and comply with Australia’s AML and CTF regulatory framework. Soon they will need to hold an AFSL.
Recent Update on Proposed Legislation
The Regulatory Reckoning – 2025/26 regulatory update
2025 saw important developments in proposed cryptocurrency and digital asset regulation in Australia.
In March 2025, the Treasury released its ‘Statement on Developing an Innovative Australian Digital Asset Industry’. The government’s approach to regulation is proactive focussing on licencing, custody standards and support for innovation.
The approach centred on frameworks for Digital Asset Platforms (DAPs) and payment stablecoins. The Government is also developing a comprehensive framework for payments service providers (PSPs).
The Treasury then prepared draft legislation for a new licencing framework. The focus for the legislation proposed by the Treasury are digital asset exchanges and tokenised custody platforms.
The DAP regime will cover foreign entities that issue and redeem payment stablecoins. This could include well known foreign stablecoin issuers such as Ripple or Circle.
The Statement is concerned with risks associated with custody arrangements, such as liquidity risk, counterparty risk, operational and fraud risk and cyber risk.
In September 2025, the Treasury released for public exposure a draft of legislation called an “Treasury Laws Amendment (Regulating Digital Asset, Tokenised Custody, Platforms) Bill 2025”.
The aim of the proposed legislation is to bring crypto platforms within the framework of the existing financial services regime pursuant to the Corporations Act and require operators of exchanges and custody platforms to hold an Australian Financial Services Licence (AFSL).
Consultation on the draft legislation closed in October 2025 and the revised version called the “Corporations Amendment (Digital Assets Framework) Bill 2025” was introduced to parliament in November 2025. The proposed amendments to the Corporations Law will add a definition of digital token, digital asset platform and tokenised custody platform.
For example, digital token is defined as an electronic record that one or more persons are capable of factually controlling. A person who is capable of factually controlling an electronic record is generally taken to have possession of the digital token. Factual control means the capacity to:
- transfer the electronic record; and
- exclude others from transferring the electronic record; and
- demonstrate that they can transfer, and exclude others from transferring, the electronic record
Paragraph 1.52 of the Explanatory Memorandum states:
Digital tokens are different. They are electronic records that can be controlled in the same way that a physical object can be possessed. That is, the transfer of a digital token shifts from the transferor to the transferee the ability to effect, and prevent others from effecting, further transfers of the digital token (subject to the concept of joint control). The ability to use or consume the digital token implicitly follows with this transfer. This ‘rivalrous’ nature is why a digital token is something that a person is able to have the same legal relationship with as they would a physical object. This is an attribute that digital tokens inherit from the distributed or decentralised systems on which they are recorded and is the primary focus of the digital token definition.
The Explanatory Memorandum referred to recent groundbreaking court cases: Re Blockchain Tech Pty Ltd [2024] VSC 690 and Poulton v Conrad [2025] TASFC 7.
In January 2026, the bill progressed to its second reading in the House of Representatives. Enactment and commencement of the legislation is anticipated in 2026.
The intention of the legislation is to treat crypto exchanges and crypto custodians in a manner similar to traditional financial intermediaries.
In relation of cryptocurrencies such as Bitcoin, the Explanatory Memorandum to the Corporations Amendment (Digital Assets Framework) Bill 2025 stated:
Within the Bitcoin network, the digital token known as ‘bitcoin’ was designed to operate as a currency – a unit of account and medium of exchange similar to commodity money such as gold. This type of digital token has become known a s a ‘cryptocurrency’.
What will change?
- Until now, fiat to crypto exchanges have been compelled by law to register with AUSTRAC.
- This will now expand to all digital asset service providers including crypto to crypto exchanges, and custodians.
- Many digital assets including stablecoins, wrapped tokens, common tokenised securities, staking products and certain crypto wallets will be categorised as financial products requiring licencing.
- The framework for crypto in Australia will shift from a loose partly regulated framework to a comprehensive licencing–based system.
Financial Products
The Corporations Amendment (Digital Assets Framework) Bill applies financial services law to digital asset platforms and tokenised custody platforms by bringing these platforms within the definition of a financial product in the Corporations Act and the ASIC Act. That is, digital asset platforms and tokenised custody platforms will be defined new kinds of financial products.
Existing cryptocurrencies
The updated guidance of ASIC on cryptocurrency in INFO 225 was released in October 2025. It infers that well-known cryptocurrencies such as Bitcoin, Ethereum and XRP are unlikely to be broadly classified as financial products per se in their native form under the Corporations Act.
Bitcoin is explicitly mentioned in ASIC’s guidance as an example of a digital asset that is unlikely to be a financial product.
The Corporations Amendment (Digital Assets Framework) Bill 2025 does not change ASIC’s view on Bitcoin as it targets platform licencing without altering any classification of specific assets like Bitcoin. XRP is not directly addressed in INFO 225 or recent ASIC statements however, there is no reason to believe it will be treated as a financial product in its native form as it functions as a utility token for cross-border payments without inherent promises of investment returns or equity-like rights.
Another consequence of the proposed legislation is that self-custodial wallets will remain outside the licencing obligations proposed by the new legislation.
Stablecoins
Stablecoins will be treated as financial products in Australia under the proposed new licencing arrangements, however, they are not mentioned in the Corporations Amendment (Digital Assets Framework) Bill. They are treated as financial products already if they meet the definition of a non-cash payment facility which require issuers and distributors of stablecoins such as USDC to hold an AFSL unless exemptions apply.
The main difficulty this will cause and the main question that arises is whether this puts Australia at a disadvantage in respect to other jurisdictions such as the United States of America where Stablecoins are not treated as securities.
The approach in the United States under the GENIUS Act which became law on 18 July 2025 is that Stablecoins are regulated as a distinct category of payment instruments and not as securities unless they fall within the definition of an investment contract pursuant to American case law (The Howey test).
This exempts most fiat pegged Stablecoins such as USDC or RLUSD from securities laws and treating them more like digital cash or money transmission services.
ASICS INFO 225 classifies many stablecoins including those pegged to fiat, as a financial product similar to a derivative (e.g. it derives its value from an underlying asset such as fiat currency) or as a non-cash payment facility.
ASIC guidance
Unlike its American counterpart, the SEC, which regulates securities which until 2025 gave little guidance to market participants, ASIC has provided information for product issuers and market operators in helpful guidelines on how they can meet their regulatory obligations in respect of exchange traded products (ETPs) and other investment products.
The information is set out in Information Sheet 225 Crypto assets (INFO 225) which was recently updated in October 2025 and Regulatory Guide Exchange traded products.
The information is meant to provide good practices for market operators in how they admit and supervise these products, and good practices for product issuers in how they establish and operate these products. Key matters covered by these information sheets include the important issues of custody and disclosure (See INFO 225 https://www.asic.gov.au/regulatory-resources/digital-transformation/digital-assets-financial-products-and-services/
and Regulatory Guide 282 https://www.asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-282-exchange-traded-products/
INFO 225 shows the view of the ASIC when an initial coin offering (ICO) is intended to fund a company (or to fund an undertaking that looks like a company) then the rights attached to the crypto asset issued by the ICO may fall within the definition of a security.
It is the rights that attach to the tokens that may be critical. ASIC’s view is that if the rights attached to the crypto-asset are similar to rights commonly attached to a share, such as ownership rights in the issuer, voting rights in decisions of the issuer or some right to participate in profits of the body, then it is likely the crypto-asset will be treated as a share. Most investors familiar with crypto will recognise that most crypto assets do not give such rights to holders even if they acquire through an ICO.
Regulatory Guide recognises that licensed exchanges may determine that crypto assets can be permissible underlying assets for ETPs admitted to their market. Regulatory Guide 282 recognises that some cryptos may not be financial products while other cryptos may be financial products.
Given the unique characteristics and risks of crypto-assets, we expect market operators to carefully assess, on an individual basis, whether it is appropriate for a particular crypto-asset to be a permissible underlying asset for ETPs admitted to their market. In conducting this assessment for crypto assets that are not financial products
Despite giving guidance to the market there remains considerable market uncertainty in the absence of comprehensive legislation that provides a regulatory framework for key digital asset activities such as custody of digital assets.
ASIC has also published guidance in the information statement on INFO 219 “Evaluating distributed ledger technology”.
Financial Products and lending activities
Cryptos that form part of an investment product may be a financial product under the Corporations Act 2001 which will cause them to fall within the financial services regulatory regime. For an example, an investment product involving cryptos may be a managed investment scheme, which is a financial product (see our comments on ASIC -v- Web3 Ventures Pty Ltd).
A product that involves crypto may also be a derivative.
Recent ASIC enforcement action has targeted crypto related products as being managed investment schemes or derivatives.
Further crypto currency lending activities may fall within the scope of credit activities and services pursuant to the National Credit Consumer Protection Act 2009 (see recent cases for an example).
The developing crypto regulatory Framework in Australia
After El Salvador recognised Bitcoin as legal tender in 2021, the Australian Government took prompt steps to clarify that Australian crypto assets are not subject to foreign currency tax arrangements.
The Treasury Laws Amendment (2022 Measures no. 4) Act amended A New Tax System (Goods and Services Tax) Act 1999 to exclude crypto assets such as Bitcoin from being treated as a foreign currency for Australian income tax purposes.
Tax Issues
Transactions involving crypto assets are subject to the same tax rules as other assets. There are no special tax rules for crypto assets.
The basic tax treatment is that:
- For tax purposes, crypto assets are not a form of money but are capital gains tax (CGT) assets;
- If cryptos are used as a payment method, the usual GST rules apply to the payment or receipt of digital currency for commodities or services.
- Rewards for staking crypto are ordinary income for tax purposes.
Developments towards legislation and regulation before 2025
On 22 August 2022, the Commonwealth Government announced token mapping would be the first stage in a multistage reform agenda that aims to develop an appropriate regulatory framework for the crypto industry.
A consultation process has commenced in Australia towards the enactment of legislation to regulate the crypto industry. The first consultation paper dealt with token mapping of cryptos and was entitled Token Mapping Consultation Paper. This consultation paper was released in February 2023.
The consultation process is being managed by the Australian Treasury. The token mapping step sought to ascertain how existing financial services regulation applies to the crypto industry.
By 3 March 2023, the closing date for submissions, ninety-one non-confidential submissions were received by the Treasury, including a submission by Morgan Mac Lawyers.
The second stage of the public consultation process focused on licensing digital asset platforms. A proposal paper entitled Regulating Digital Asset Platforms was released by the Australian Treasury in October 2023 (view it here: https://treasury.gov.au/sites/default/files/2023-10/c2023-427004-proposal-paper-finalised.pdf)
This focus on licensing digital asset platforms represents the fact that one in four Australians own some crypto, and digital asset platforms now hold digital assets on behalf of consumers valued at billions of dollars. Another reason for the focus on licensing digital asset platforms is the collapse of digital asset platforms in Australia and overseas.
Further regulation of digital asset platforms has three goals:
- Introducing a framework that fosters innovation and growth;
- Providing the industry with certainty and clarity;
- Protecting consumers and their assets.
Pursuant to the proposed regulation, the existing Australian financial services law will be leveraged to partly regulate crypto and digital asset platforms that hold cryptos above a certain threshold value (either per customer or aggregated) will need to obtain an Australian Financial Services Licence. This will require digital asset platforms to meet Australian financial services regime legal and licensing obligations.
In addition, digital asset platforms will need to meet additional specific obligations unique to the digital asset industry. The specific obligations to be uniquely imposed on the crypto industry will include:
- standard form platform contracts
- minimum standards for holding tokens
- standards for custody software
- standards when transacting in tokens
Further, certain digital asset activities will attract additional obligations including trading, staking, tokenisation and fundraising.
The risk of the proposal is over-regulation. Crypto platforms face more regulation than non-crypto platforms.
The proposed regulatory approach focuses on digital asset service providers who hold consumer’s cryptos and not the tokens themselves.
Recent Court Decisions – Common Law cases
Morgan Mac Lawyers keeps up to date and comments on recent important and relevant cases involving crypto.
Please see our case reviews on the following cases:
- Blockchain Tech Pty Ltd [2024] VSC 690
- Poulton v Conrad [2025] TASCF 2
- King River Digital Assets SPC v Salerno [2023] NSWSC 510.
Blockchain Tech Pty Ltd [2024] VSC 690
Is Bitcoin Property?
The recent case of Re Blockchain Tec Pty Ltd [2024] VSC 690 was a significant milestone in the development of the law in relation to bitcoin and the new asset class of cryptocurrency or digital assets.
Prior to this case, no judge of Superior Court in Australia had determined upon a trial or full hearing whether a person’s possession or control of cryptocurrency, such as bitcoin, is property as that term is understood in Australian common law.
There had been a number of interlocutory decisions, including in a family law or insolvency context, that indicated that cryptocurrency, such as bitcoin, is property.
In this case, the Court needed to decide whether bitcoin was property and whether it could be subject to a bailment.
Main Facts
The plaintiffs claimed that the second plaintiff, Blockchain Tech Pty Ltd had ownership and control over certain bitcoin holdings.
The Plaintiffs claimed, and the Defendant denied, that there was a Blockchain Business and a Blockchain Business Agreement involving several entities including Blockchain Tech Pty Ltd and that the first defendant, Ms Zhao, contributed 66.2 bitcoins to the Blockchain Business.
The Defendants alleged that the 66.2 bitcoin were lent to the first plaintiff, Mr Chen by Ms Zhao pursuant to a bitcoin Loan Agreement.
The Court found the parties reached an agreement in July 2018 to operate companies and businesses concerning a crypto currency wallet, a cryptocurrency exchange and cryptocurrency, with Mr Chen and Ms Zhao having a 70% and 30% interest respectively. They made contributions reflecting this percentage split, including loans of bitcoin to Blockchain Tech Pty Ltd, which would be realised when required for working capital.
The Court found that Ms Zhao lent 66.2 bitcoin to Blockchain Tech Pty Ltd.
The Plaintiffs alleged that 36 bitcoin were transferred to the Ms Zhao to be kept safe by her and then returned after an audit of Ms Zhao’s superannuation fund. The Plaintiffs alleged that Blockchain Tech Pty Ltd owned the 36 bitcoin which were subject to a bailment arrangement, entitling Blockchain Tech Pty Ltd to immediate possession.
The Court found that 35.99990950 bitcoin were transferred to Ms Zhao’s bitcoin wallet address. Mr Zhao caused 3 bitcoin to be transferred to a wallet of a BTC Markets account held by Ms Zhao’s husband, Mr Zhang, and 32.99986410 to another wallet address.
Documents produced by BTC Markets on subpoena showed that amounts of 7 bitcoin and 22.99 bitcoin were on-transferred by Ms Zhao to other bitcoin wallet addresses
An additional 25 bitcoin were transferred by Ms Zhao from a Trezor wallet into which Mr Chen had previously contributed 100 bitcoin to Blockchain Tech Pty Ltd. This transfer by Ms Zhao was made to Mr Zhang’s BTC Market account and involved three separate transactions of 5, 10 and 10 transfers of bitcoin each to a different address and finally to Mr Zhang. Mr Chen said he allowed these transfers so that the bitcoin could be sold to meet working capital needs of the Blockchain Business.
The plaintiffs alleged that the 25 bitcoin were held on trust by Ms Zhao for Blockchain Tech Pty Ltd.
The Court found that Ms Zhou held the 25 bitcoin on an express trust for Blockchain Tech Pty Ltd and she had an obligation to deal with the 25 bitcoin fo the benefit of Blockchain Tech Pty Ltd by selling the 25 bitcoin and remitting the sale proceeds to Blockchain Tech Pty Ltd to be used as working capital in the Blockchain Business.
The 25 bitcoin were subsequently sold by Ms Zhao. She only remitted part of the sale proceeds in the sum of $82,838.00 to Blockchain Tech Pty Ltd.
Issues
The main issues were whether bitcoin was a form of property and whether it could be held on a bailment.
Justice Attiwill applied the classic common law criteria for property from National Provincial Bank v Ainsworth [1965] AC 1175.
The criteria are as follows:
- Does a thing have definable subject matter;
- Is it identifiable by third parties;
- Is it capable of assumption by third parties;
- Does it have a degree of permanence or stability.
Court reasoning
In deciding whether bitcoin is property and whether it can be subject to a bailment, the Court reviewed:
- International cases in the UK, Singapore and New Zealand dealing with crypto;
- Interlocutory cases in Australia dealing with crypto;
- Extrajudicial comment in a 2024 speech by Justice Jackman called “is cryptocurrency property”;
- Reports on crypto prepared by the United Kingdom Law Commission which had been referred to with approval in several decisions in England Wales;
- A 2019 legal statement on crypto of the UK Jurisdiction Taskforce.
The Court extensively reviewed cases on the issue of what is property.
The Court observed that property is a legal relationship with a thing and refers to a degree of power that is recognised by the law as a power permissively exercised over the thing. Certain property is tangible and other property is intangible in which control and possession cannot be separated.
Definable subject matter
In applying National Provincial Bank v Ainsworth, the Court needed to first identity the thing or subject matter. It found that the thing is bitcoin, an electronic or digital coin or token. The Court observed that bitcoin is data in the form of a unique digital address on a network of computers, which is referred to as a shared public ledger. A public cryptographic key is generated that identifies the unique digital address on the shared public ledger.
Identifiable by third parties
Secondly, the Court observed that an interest in bitcoin is also identifiable by third parties. The public key identifies an address of a person’s bitcoin at that address on the shared public ledger. A person has the power to control and deal with the bitcoin and to exclude third parties from accessing or dealing with it. This is because a private cryptographic key is also generated.
Both the public and private keys are required to deal with bitcoin.
Is it capable of assumption by third parties
Although the Court found that a bitcoin transfer transaction is not a transfer of a person’s interest in bitcoin, it found alienability is not an indispensable attribute of property. Further, it can be traded on crypto exchanges.
degree of permanence or stability.
Thirdly, a person’s interest in bitcoin has a degree of permanence or stability. Bitcoin is recorded on a shared public ledger that contains the entire life history of a crypto coin and the bitcoin is held at a certain digital address.
Bitcoin also remains stable at the address until there is a transaction concerning those bitcoin. A transaction must involve the use of the public key and the private key.
The Court observed that a person’s interest in bitcoin may be readily distinguished from a mere interest in information including electronic data. This is because an interest in bitcoin includes the power:
- To undertake transactions on a network by the use of a public key and a private key;
- To exclude third parties from accessing or dealing with that bitcoin.
The Court found that an interest in bitcoin is property and is a chose in action which does not confer the present possession of a tangible asset. It is intangible property.
In relation to the issue of bailment, the Court noted that a bailment comes into existence upon delivery of goods of one person, the bailor into the possession of another person, the bailee, upon a promise, express or implied that they will be redelivered to the bailor.
A bailment does not apply to intangible property. With intangible property the Court observed there is no separation of ownership and possession and there is nothing physical that can be possessed. The 36 bitcoin transferred to Ms Zhao were not subject to bailment.
Outcome
The Court held that:
- An interest in bitcoin is property but it is intangible property and not held in possession.
- An interest in bitcoin cannot be the subject of a bailment.
There has been no conflicting authority in any other Australian Supreme Court case and this decision was not appealed. It has however recently been unanimously distinguished in unanimous obiter dicta in the decision of the Full Court of the Supreme Court of Tasmania). It is likely that this case is a decisive moment in bitcoin being held in Australian common law as a form of intangible property.
Relief ordered
The Plaintiffs sought the following relief:
- A declaration that if Ms Zhao retained the 25 and/or 36 bitcoin she held them on trust for Blockchain Tech Pty Ltd;
- Orders that Ms Zhao deliver up the bitcoin to Blockchain Tech Pty Ltd;
- To the extent she no longer held possession, custody or control of the bitcoin, that she pays equitable compensation for the loss of the bitcoin.
In respect of the 25 bitcoin, Ms Zhao was ordered to pay equitable compensation of $168,918.00 which was adjusted to $86,080.00 to account for an amount of $82,838.00 she had remitted back to Blockchain Tech Pty Ltd.
The Court found that Blockchain Tech Pty Ltd was not entitled to relief against Ms Zhao concerning the alleged bailment of 36 bitcoin, as no bailment arose.
Attempts to hold third parties who received the 36 bitcoin from Ms Zhao were unsuccessful either because some of the parties were not joined or legal claims against Mr Zhang were not properly pleaded.
Other considerations
The case shows that even if a person holds the private keys allowing access to cryptocurrency and or control over a crypto exchange account, the cryptocurrency mat still be subject to an express trust in favour of a beneficiary who does not possess the private fees or have access to the cryptocurrency account.
Poulton v Conrad [2025] TASCF 2
A recent decision of the Full Court of the Supreme Court of Tasmania delivered on 19 September 2025 is a significant development on the issue of whether crypto currencies such as bitcoin are property and what causes of action may be available to parties aggrieved by the conduct of other people in control of their crypto assets.
This decision should be read together with the decision of the Supreme Court of Victoria in Re Blockchain Tech Pty Ltd [2024] VSC 690.
In Poulton v Conrad, the Full Court of the Supreme Court of Tasmania unanimously distinguished in obiter dicta the earlier recent decision of Re Blockchain Tech Pty Ltd which held that bitcoin was intangible property and could not be subject to a bailment.
In Poulton v Conrad, there was no issue about bailment, but the respondent, Mr Conrad, had sought to maintain legal claims against the appellant, Mr Poulton, in conversion and detinue in respect of bitcoin in the control of Mr Poulton.
Legal Claims
Mr Conrad claimed that Mr Poulton had wrongly withheld crypto assets including bitcoin, bitcoin gold, and bitcoin cash as an unauthorised fee leading to proceedings in a Magistrates Court for detinue, conversion, restitution, breach of contract and negligence.
Mr Poulton argued that claims in detinue and conversion were not available to Mr Conrad.
The Magistrates Court disagreed and Mr Conrad’s claims in detinue and conversion were successful. The Magistrates Court that all of the cryptocurrency should have been returned to Mr Conrad on demand and no part kept as fees, and awarded Ms Conrad damages, including exemplary damages, in the sum of $46,000.00.
First Appeal
The matter went on appeal from the Magistrate Court decision to single judge of the Supreme Court of Tasmania (First Appeal).
It was implicit from the manner in which Mr Poulton conducted the First Appeal that he accepted bitcoin was property capable of immediate possession.
The Supreme Court found no error in the determination by the Magistrates Court that the claim in detinue and conversion had been made out on the evidence.
Key Issues
The Full Court observed that an action for conversion or detinue must show an immediate right to possession.
This immediate right to possession applies, like bailment, attaches to tangible property in which ownership and possession can be divided. On the reasoning in Re Blockchain Tech Pty Ltd, if followed the Full Court may have found that Bitcoin was an intangible asset and a claims in detinue and conversion should fail.
Procedural issue
The primary issue in the appeal before the Full Court was a procedural issue whether Mr Poulton should have been allowed to raise an argument that bitcoin is an intangible asset incapable of possession when he conducted the First Appeal on the implicit assumption that bitcoin was property capable of immediate possession.
This was contrary to the position that Mr Poulton had had run in the First Appeal. If bitcoin was intangible property incapable of possession, then it could not be subject to the torts of conversion and detinue. Mr Poulton had raised this in the Magistrates Court proceeding but abandoned this point in the First Appeal.
Substantive law issue
The other key issue was whether bitcoin may be classified as property under the common law, and whether it falls within the well-known dichotomy of a chose in possession or a chose in action. Specifically, was bitcoin a form of intangible property that can be possessed in relation to which rights can be forced by possession-based remedies such as remedies available for detinue or conversion reasons.
Court Reasoning and Decision
The Full Court majority dismissed the appeal on the procedural ground upholding the decisions of the Magistrates Court and Supreme Court. One judge did not dismiss the appeal on the procedural ground
The majority of the Full Court were not prepared to allow Mr Poulton to raise the argument it had previously abandoned in the First Appeal that bitcoin is property that is capable of possession. Allowing the appeal to proceed on this ground would prejudice Mr Conrad who had relied on the manner in which the case had been framed and litigated before the Magistrate and in the First Appeal. For this procedural reason Shanahan CJ and Jago J dismissed the appeal. Estcourt J dissented on dismissing the appeal on this procedural ground.
This meant that the Court did not need to rule on the legal issue of whether cryptocurrency is property capable of possession. However, all three Full Court Judges unanimously agreed that bitcoin meets the criteria for property outlined in National Provincial Bank v Ainsworth [1965] AC 1175.
All three Full Court judges also found that the Court should recognise a need to adopt and adapt common law to the digital realities of the 21st century and endorsed a third category of property being intangible property that can be possessed. They found that bitcoin fits this category due to certain of its features that relate to exclusivity and control.
They essentially found that the dichotomy in previous cases between choses in possession and choses in action is outdated and did not accept that conversion and detinue should be limited to choses in possession. They found that these causes of action could be relied on by Mr Conrad in relation to bitcoin. The Court distinguished Re Blockchain Tech Pty [2024] VSC 690 in which the Court classified bitcoin as a chose in action incapable of physical possession and therefore, an asset that could not be held on bailment. Shanahan CJ viewed private keys as ‘avatars of possession embodying control over wealth entitlements.
The Appeal was dismissed.
Considerations
The Full Court in Poulton v Conrad was influenced by the control and holder rights conferred on the holder of relevant private keys of a PIN including the right to effect new transactions. Control and the intent to exercise dominion over wealth entitlement as represented by the PIN or private keys. Although the Full Court’s unanimous obiter was that these holder rights are capable of possession in relation to the torts of conversion and detinue, the implications are wider and more profound.
As the Chief Justice stated in the concluding paragraph of his judgment:
“…the metaphysics of the nineteenth century are not broad enough to imagine twenty first century specie of wealth, or the potential application of fifteenth century remedies thereto”.
But the Full Court accepted these fifteenth century remedies applied to bitcoin in the twenty-first century.
King River Digital Assets SPC v Salerno [2023] NSWSC 510
In King River the issue was whether an arbitration clause in a contract between a consumer and a digital asset trading business called TrigonX should stay legal proceedings against the director of TrigonX
Facts
The facts were that after signing the contract with TrigonX, King River was on-boarded in March 2022 as a customer of TrigonX.
From time to time, King River transferred crypto assets to TrigonX and purchased crypto assets from TrigonX. Further, King River transferred USD funds to TrigonX and sold crypto assets to TrigonX in exchange for USD funds.
By the time of the FTX ex-bankruptcy in November 2022, TrigonX held USD$20,400,000 of King River’s assets of which USD$9,500,000 had been transferred by TrigonX to FTX.
King River demanded the return of its funds held by TrigonX. Shortly after this demand, TrigonX was placed into administration.
King River commenced proceedings against the sole director of TrigonX, Mr Salerno, who was not a party to the contract between King River and TrigonX.
The claim against Mr Salerno was for damages pursuant to section 236 of the Australian Consumer Law for misleading and deceptive conduct in contravention of section 18 of the Australian Consumer Law. King River stated that TrigonX represented that:
- It had not exposed King River’s digital assets to third party exchange risk;
- None of King River’s were held by FTX;
- All of King River’s USD funds were held in various bank accounts.
The representations were untrue because some of King River’s assets and USD funds were held by FTX and because it was misled about this state of affairs King River lost the chance to have them returned before FTX became bankrupt.
King River alleged that Mr Salerno was an accessory to and involved in the misleading conduct of Salerno.
The issue was whether the court proceedings should be stayed, and the matter referred to arbitration pursuant to the relevant arbitration legislation, even though Mr Salerno was not a party to the contract containing the arbitration clause.
Arbitration clause
The resolution of this issue depended on whether the arbitration clause extended to Mr Salerno even though he was not a party to the contract between King River and TrigonX. This in turn depended on whether the extended definition of “party” in the Commercial Arbitration Act, which applies to ‘any person claiming through or under a party to an arbitration Agreement’.
The Court noted that the meaning of this part of the definition extended to any person seeking to enforce a right or resist the enforcement of a right of a party to the arbitration agreement. This applies if an essential element or a cause of action or defence was vested in or exercisable by an arbitral party.
In this case, TrigonX was an arbitral party, and the defence of Mr Salerno turned on a ground of defence exercisable by TrigonX, namely that it did not make misleading representations and did not engage in misleading and deceptive conduct.
The arbitration agreement did apply to the proceedings and the Court ordered that the proceedings be stayed.
The case is important in showing how arbitration clauses in agreements involving crypto can apply to third parties standing behind entities that are parties to the agreement and cause legal proceedings against those third parties to be stayed while an arbitration process continues.
See Judgment:
Recent Court Decisions – ASIC cases
Morgan Mac Lawyers keeps up to date and comments on recent important and relevant cases involving crypto.
Please see our case reviews on the following cases:
- Blockchain Tech Pty Ltd [2024] VSC 690
- Poulton v Conrad [2025] TASCF 2
- King River Digital Assets SPC v Salerno [2023] NSWSC 510.
ASIC -v- Bit Trade Pty Ltd
In this proceeding, ASIC alleged that Bit Trade contravened the design and distribution requirements relating to products contained in part 7.8(A) of the Corporations Act 2001 (Cth) by offering credit to customers in spot trading of digital assets on the Kraken Exchange.
The credit was provided in the form of digital assets or legal tender and was called a margin extension. To obtain this credit, customers needed to exceed a minimum balance on their account at the time of accessing the credit and have sufficient collateral in their account to support the margin extension.
In the period from 9 January 2020 to 11 August 2023, 1,150 clients used the retail product of whom 968 of these clients suffered losses totalling AUD$12,951,083.40.
ASIC alleged that the margin extension was a credit facility on the grounds Bit Trade offered its customers credit for use in spot transactions of some crypto assets and was a financial product.
Once the credit was provided, Bit Trade customers were required to keep in their account a minimum amount of assets which was determined by Bit Trade as collateral.
Bit Trade was entitled to sell or liquidate the assets purchased with the credit if collateral levels fell below the required minimum.
Section 994B of the Corporations Act required Bit Trade to make a target market determination (TMD) and to make it available to the public before engaging in retail distribution of its credit product.
Bit Trade charged fees for providing the credit to its customers.
Bit Trade distributed (issued) and continued to distribute the financial product without making and publishing a TMD.
ASIC sought declarations and pecuniary penalties in relation to the alleged contravention and injunctions prohibiting ongoing distributions of the margin extension.
See the concise statement filed by ASIC. https://download.asic.gov.au/media/equhk4dw/23-256mr-concise-statement-asic-v-bit-trade.pdf
ASIC -v- Web3 Ventures Pty Ltd
On 23 November 2023, ASIC commenced proceedings in the Federal Court of Australia against Web3 Ventures Pty Ltd trading as block earner (Block Earner). Block Earner offered to consumers fixed yield earning products based on digital assets being USDC (a stable coin), PAXOS Gold, Bitcoin and Ethereum.
Block Earner also offered variable yield earning products to consumers. This table summarises the products Block Earner offered and the underlining digital asset or assets.
Yield Type | Underlining Asset | Product Name |
Fixed | USDC | USD Earner |
Fixed | PAXOS Gold | Gold Earner |
Fixed | Bitcoin, Ethereum | Crypto Earner |
Variable | USDC, BTC & Eth (Invested in the Ave and compound DeFi protocols) | Access |
Facts
ASIC alleged that these products were financial products for the purpose of the Corporations Act 2001 (Cth), being one or more of the following:
- A managed investment scheme;
- An investment facility;
- A derivative.
On 16 November 2022, Block Earner ceased offering the fixed yield earning products. At the time, Block Earner ceased offered the fixed yield products the annualised percentage yields offered to investors 7% for USD Earner and 4% for Gold Earner and Crypto Earner.
Block Earner on its website under FAQs, stated that Block Earner is able to generate returns by gathering customer funds and lending it to our trusted partners to receive a favourable yield rate. In response to other FAQs, Block Earner stated that:
- When customers lend digital assets, they would begin earning daily compounded yield;
- Block Earner took care of the heavy lifting by providing a user-friendly portal for earning high yields;
Block Earner Products involved a process in which a customer’s nominated Australian dollar amount was converted to the appropriate crypto asset through an overseas exchange platform (described as an exchange service), and the newly converted crypto assets were automatically loaned to Block Earner on an unsecured basis referred to as a lender service. Block Earner then lent those crypto assets on an unsecured basis to third parties from whom they received a fixed yield.
In respect of the Access Product, Block Earner converted consumers AUD deposits into nominated crypto assets through a centralised exchange service provider and transferred them to the AAVE or Compound DeFi protocols to earn yield.
ASIC argued that the Earner Product and the Access Product were managed investment schemes within the definition of section 9 of the Corporations Act. A managed investment scheme contains the following components:
- There is a scheme;
- Consumers contribute money or monies worth (e.g. digital assets) as consideration to acquire rights or benefits produced by a scheme;
- Any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or rights or interests in property for those members who hold interests in the scheme;
- The members in the scheme do not have day to day control over the operation of the scheme.
Earner Product and Access Product
ASIC contended that the Earner Product satisfied this test for a managed investment scheme because consumers gave money or digital assets to block earner (the contribution). Block Earner used the contributions to generate yield or an increase in the value of the crypto assets (the rights or benefits). Block Earner represented that the contributions of consumers were pooled to produce yields and consumers did not have day to day control over the operation of the scheme.
In the case of the Access Product, Block Earner’s terms provided that Block Earner aggregates the DeFi tokens in an omnibus account (pooling) and consumers have no day to day control over the operation of the scheme and/or the compound and AAVE DeFi protocols.
ASIC also alleged that the Earner Product and Access Product were investment facilities within the definition of section 763B of the Corporations Act because they had the following features:
- Contribution of money or crypto assets by a consumer;
- Use by Block Earner of consumer’s contributions to generate a financial return to the consumer or an intention by the consumer or Block Earner that it would use the contributions to gain a financial return for the consumer;
- The consumer has no day to day control over the use of their contributions to generate the return.
Finally, ASIC contended the Earner Product and Access Products were derivatives because the amount of consideration measured in AUD varied by reference to the value of the crypto assets because:
- In respect of the Earner Product, on exiting their accounts, consumers funds were converted from crypto assets to AUD at the relevant exchange rate between AUD and the crypto asset applied by Block Earner;
- In respect of the Access Product because the yield paid to consumers by Block Earner varied by reference to the yield paid by DeFi protocol.
As the entity responsible for the obligations to consumers under the terms of the Earner Product and the Access Products, Block Earner was the issuer of these products under section 761E(4) of the Corporations Act. As these products were financial products, by issuing the products Block Earner was dealing in financial products pursuant to section 766C and providing a financial service pursuant to 766A of the Corporations Act. This meant that Block Earner required an Australian financial services licence (AFSL) in respect of the Earner Product and Access Products. It did not have an AFSL in contravention of section 911A of the Corporations Act.
Further, as the Earner Product and Access Product were managed investment schemes, they were required to be registered with ASIC. Block Earner failed to register these managed investment schemes with ASIC and operated managed investment schemes in contravention of section 601E,D(5) of the Corporations Act.
Outcome
Judgment was delivered by the Federal Court of Australia on 9 February 2024 in ASIC v Web3 Ventures Pty Ltd [2024] FCA 64. The Court found that the Earner Products were financial products, and the Access Product was not a financial product.
The Court found that the Earner Product was a managed investment scheme because:
- There was a scheme;
- There was a contribution by consumers who were not acting alone and independently to achieve a return on their investment. The contribution was made by customers jointly with others to acquire a right to a benefit from the scheme, namely a fixed interest rate and repayment of the principal and interest. The return did not fluctuate based on the fortunes of Block Earner’s business or any income Block Earner earned from lending its customers’ crypto to third parties. However, it was significant that Block Earner represented that it could pay the benefit by lending the aggregated cryptocurrency of its customers at a higher interest rate offered in the Earner Products.
- The contributions of investors were pooled, and this was represented on the Block Earner website. Further Block Eaner represented that the purpose of the pooling was to allow Block Earner to generate funds by lending to third parties in return for a favourable yield. The facts satisfied the implicit requirement in case law for this element of the test that the contributions must be objectively intended by consumers to produce financial benefits.
- Consumers who used the Earner Product did not have day-to-day control over the operation of the Scheme.
The Court found that the Access Product was not a financial product and specifically, was not a managed investment scheme.
Interestingly, the court did find the Access Product was a scheme and did find that consumers who used the Access Product did not have day-to-day control over the operation of the Scheme but found that the other elements for the statutory test were not satisfied.
Firstly, on the basis that the term contribute conveys joint rather than independent action, the Court found that the individual holdings of consumers from their own perspective were treated on an individual basis, and they retained ownership of their DeFi tokens issued by Compound and AAVE, and even though the tokens were issued to Block Earner and held in its omnibus Compound or AAVE accounts. The Court found that consumers did not use the Access Product to furnish Block Earner with a common fund.
In terms of the element of pooling or contributions or a common fund, ASIC sought to rely on Block Earner’s use of an omnibus account on the AAVE and Compound protocols and submitted that it only needed to show that contributions were pooled and that there were financial benefits through the scheme to those who held interests in the scheme. ASIC submitted it did not need to show a link between the pooling and the financial benefit other than that they were both elements in the scheme.
The Court rejected ASIC’s submission and found that there must be a link between pooling of contributions or their use in a common enterprise and the production of financial benefits. There was no evidence from which it could be inferred that users objectively intended that their payments would be pooled to produce financial benefits. ASIC failed to satisfy its onus to prove this element of a managed investment scheme.
The decision is likely to be persuasive as it is the first ASIC enforcement case of this nature involving crypto that has been contested that has so far resulted in a judgment.
The case shows the importance of obtaining compliance advice on whether crypto market participants are dealing with financial products or financial services. The fact crypto is involved does not mean the Australian financial services regulatory regime does not apply.
See the amended concise statement filed by ASIC:
See the judgment: 24-019MR ASIC v Web3 Ventures – Judgment
ASIC V BPS Financial Pty Ltd
On 25 October 2022, ASIC commenced legal proceedings against BPS Financial Pty Ltd.
ASIC alleged that BPS Financial Pty Ltd (BPS) implemented a facility in relation to a crypto asset called Qoin (Qoin Facility).
According to ASIC, the Qoin Facility is a non-cash payment facility that was established by BPS in January 2020 and includes:
- Qoin tokens;
- A wallet;
- A distributed digital ledger implemented by blockchain technology;
- A means of acquiring Qoin tokens, including from BPS or an entity associated with BPS;
- A means whereby business operators who hold Qoin Wallets can register as participating merchants (Qoin Merchants) in the Qoin Facility.
ASIC alleged that BPS promoted Qoin tokens to retail consumers and Qoin Merchants as a means of making payment for goods and services offered by Qoin Merchants.
The Qoin Wallet allows the user to transact only in Qoin Tokens and a person cannot transact with Qoin without the Qoin wallet.
BPS promoted the Qoin Wallet by various statements as the only means of using Qoin Tokens to make payment for goods and services offered by Qoin Merchants for the purposes of the Qoin Facility.
Block Trade Exchange Pty Ltd (BTX), a related entity of BPS, has operated the BTX Exchange. Qoin Tokens can be acquired on the BTX Exchange.
By 24 October 2022, there were approximately 37,900 Qoin Merchants registered with BPS.
BPS operates a digital directory called ‘Q Shop’, on which Qoin Merchants and consumers who hold Qoin Wallets, advertise goods and services that can be purchased using Qoin Tokens.
The Qoin Wallet App includes a gateway to the Q Shop.
As time passed, limits were imposed restricting Qoin holders from exchanging Qoin tokens for Australian dollars on the BTX Exchange.
BPS has issued and maintained combined Financial Services Guides and Product Disclosure Statements by which BPS offered to issue or invited applications for a facility described in the Qoin Offer Documents and referred to as the ‘Payment System’ which according to ASIC was the Qoin Facility or the Qoin Wallet.
This payment system, which ASIC called the Qoin NCP Product is alleged by ASIC to be a facility through which a person makes non-cash payments; and) is therefore either:
- a ‘financial product’ for the purposes of Chapter 7 of the Corporations Act 2001 (Cth)(Corporations Act) and Part 2 of the ASIC Act; (by Sections 763A(1)(c) and 763D of the Corporations Act and sections 12BAA(1)(c) and 12BAA(6) of the ASIC Act); and
- a ‘financial service’ for the purposes of Part 2 of the ASIC Act (Section 12BAB(1AA) of the ASIC Act).
From January 2020 until 30 September 2022, BPS has issued this financial product more than 93,000 times.
Interestingly, ASIC alleged that making the QOIN wallet available for use and requiring Qoin wallet users to agree to registration on terms agreed with QOIN and stipulated from time to time on its website was an issue of the Qoin NCP Product.
ASIC also referred to multiple representations and statements on the Qoin website or it the Qoin whitepaper that were intended or reasonably regarded as intended to influence persons to make a decision in relation to the Qoin NCP Product. This amounted to BPS engaging in a financial services business without an Australian financial services licence in contravention of section 911A(5B) of the Corporations Act.
There is also an issue about several representations made by BPS which ASIC alleges were:
- the making of false or misleading with respect to the Qoin NCP product in contravention of section 12DB(1) of the ASIC Act;
- conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 12DA(1) of the ASIC Act.
The matter proceeded to a trial that took place from 16-19 October 2023 and judgment has been reserved and not yet been delivered.
See ASIC’s Amended Statement of Claim:
https://download.asic.gov.au/media/nhydelw1/22-287mr-asic-v-bps-amended-soc-sealed-20230621.pdf