Legal status of cryptocurrencies

September 22, 2021, by Junayed Ahmed Chowdhury, Maliha Ahmed & Ibrahim Al Amin

In 2009, the first bitcoin came into existence and was proposed as a new electronic payment system based on cryptographic proof as opposed to trust in certain financial institutions or banks. It has been almost twelve years since its inception; yet still, its legal status remains uncertain.


As a general description, cryptocurrency is a demonstration of two data parameters, one of which is public, which means publicly available to all participants in the specific cryptosystem; and another is private to the owner of the cryptocurrency [1]. The public parameter, among others, contains specific encoded information like its ownership, value, and transaction history; whereas, the private parameter (also referred to as private key) permits transfer or other dealings in the cryptocurrency to be cryptographically authenticated by a digital signature, thus conferring practical control over it [2]. If an individual holding cryptocurrency wants to legally protect it from attack (i.e. hacking), then the cryptocurrency needs to be legally recognized as a property to bring an action.


Is cryptocurrency a property?

The fact that distinct parameters have specific roles influenced the decision of the High Court of New Zealand Christchurch Registry to come to the conclusion that cryptocurrencies are a species of intangible personal property that in clear terms is an identifiable thing of value [3]. In coming to this conclusion, the Court applied the classic definition given by Lord Wilberforce in the House of Lords decision of National Provincial Bank v Ainsworth [1965] 1 AC 1175 (HL) which states that for there to be a property right, “it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.” The justification of the High Court of New Zealand Christchurch Registry comes in four parts:

(a)    Firstly, cryptocurrencies have to be definable. For this purpose, the Court compared the identifiability provided by cryptocurrency data recorded in network of computers to the indefinability provided by banks in inclusion of balances in a customer’s bank account.

(b)    Secondly, the owner must have the power to exclude others from accessing its cryptocurrency. This is achieved by allocating a private key to every public key (this private key being like a PIN), and requiring the combination of both in order to record a transfer. This private key ensures that third parties are excluded from accessing a particular cryptocurrency one may own.

(c)    Thirdly, cryptocurrencies can be and are subject to active trading markets, thereby satisfying the condition of it being capable of assumption by third parties.

(d)    Lastly, the blockchain approach used by cryptocurrency systems satisfy the requirement of permanence or stability. A particular cryptocoin stays fully recognised, in existence, and stable until it is “spent” through the use of the private key, and most standard cryptocurrency systems do not provide for the arbitrary cancellation of coins.


A similar position can be found in the Queen’s Bench Division (Commercial Court)’s decision given in AA v. Persons Unknown & others Re Bitcoin [2020] 4 W.L.R. 35, where it was held that cryptocurrencies constitute property under English Law. The Singapore Court of Appeal, however, pointed out that though cryptocurrencies are capable of assimilation into the general concepts of property, there are difficult questions as to the type of property that is involved. Thus, the Court did not take any final position on the question since it felt that the precise nature of the property right involved is not clear [4].


From Bangladesh’s perspective, the General Clauses Act, 1897 provides a wide definition of the term “movable property” which means “property of every description, except immoveable property”. The use of the words “of every description” suggests inclusivity and a wide boundary for the definition of property. Thus, based on precedents from other common law jurisdictions, it can be argued that cryptocurrencies may fall within the ambit of “movable property” in Bangladesh.


Regulating cryptocurrencies

The Bangladesh Bank has on occasions issued notices and notifications advising against the use and trading of cryptocurrencies. For example, on 24.02.2017, a notice was issued wherein the Bangladesh Bank cautioned everyone from using cryptocurrencies such as “Bitcoin, Ethereum, Ripple, Litecoin etc”. The 2017 notice stated that cryptocurrencies are not legal tender of any country and the transactions are not sanctioned by the Bangladesh Bank or any other regulatory agency, and therefore, the same can be potentially violative of the Foreign Exchange Regulation Act 1947, the Anti-Terrorism Act 2009, and the Money Laundering Prevention Act, 2012.


The Indian Supreme Court decision in Internet and Mobile Association of India v. Reserve Bank of India [5] points out that the government of various countries opine that though virtual currencies have not acquired the status of a legal tender, they still constitute digital representations of value and they can function as a medium of exchange, a unit of account and/or a store of value. The Indian Supreme Court also pointed out that depending upon the language of the statute and the context, “various courts in different jurisdictions have identified virtual currencies to belong to different categories ranging from property to commodity to non-traditional currency to payment instrument to money to funds” [6].


Interestingly, the Foreign Exchange Regulation Act, 1947 (as amended in 2015) states that “currency” may include “such other similar physical or non-physical instruments, or both as may be notified by the Bangladesh Bank from time to time” [7]. The use of the word “non-physical instrument” may be regarded as an open gateway for the inclusion of cryptocurrency within the definition of “currency”. If the Bangladesh Bank issues any circular to this effect, then the Bangladesh Bank can impose regulations on transactions involving cryptocurrency.


Among others, the main functions of the Bangladesh Bank are “to formulate and implement monetary policy”, “to promote, regulate and ensure a secure and efficient payment system, including the issue of bank notes”, and “to regulate and supervise banking companies and financial institutions” [8]. If institutions in Bangladesh accept cryptocurrencies as valid payments in Bangladesh (which is currently not the case), then it would fall within the purview of jurisdiction of the Bangladesh Bank. In other words, if an intangible property (like cryptocurrency) can be treated under certain circumstances as money, then it is arguable that the Bangladesh Bank can take note of it and regulate the same [9].


Written by Junayed Chowdhury, Managing Partner, Maliha Ahmed and Ibrahim Al Amin, Consultants at Vertex Chambers

† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.

[1] Legal statement on cryptoassets and smart contracts by UK Jurisdiction Taskforce

[2] Ibid.

[3] David Ian Ruscoe and Malcolm Russell Moore vs. Cryptopia Limited (In liquidation) [2020] NZHC 728

[4] Quoine Pte Ltd vs. B2C2 Ltd | [2020] SGCA(I) 02 at para 144

[5] WP (Civil) No. 528 of 2018

[6] Ibid. at para 6.85

[7] Section 2(b)(ii) of the Foreign Exchange Regulation Act, 1947

[8] Article 7A of the Bangladesh Bank Order, 1972

[9] Internet and Mobile Association of India v. Reserve Bank of India, WP (Civil) No. 528 of 2018 at para 6.87