Theft and 'Quasi-Conversion' of Crypto-Assets

The Property (Digital Assets etc) Act 2025 is now law and, despite my earlier criticisms of it, we now have to live with it. However, significant unanswered questions remain, not helped by Cotter J striking out the claim of conversion of the bitcoin—but peculiarly not the claim of trespass—in Yuen v Li [2026]. 

In advance of the hearings in the High Court of Australia in Poulton v Conrad on whether bitcoin are property and if so whether they can be converted, I argue in a forthcoming article in the Journal of Business Law (‘Involuntary Alienation, Crypto-Assets and the Tertium Quid’) that there are broadly two models of chose in action and two of crypto-assets. 

The first model of choses in action is the ‘narrow’ model—that they are enforceable claim-rights against an identifiable counter-party. Debts count, but bitcoin do not. The second model is the ‘wide’ model where a chose in action is any property that is not a chose in possession. This is the model adopted in Australia by Cain’s Case [1956] and will hopefully be adopted in Poulton v Conrad. The Property (Digital Assets etc) Act 2025 implicitly endorses the narrow model, but by not expressly defining choses in action does leave the door ajar to the wide model. There are also two models of crypto-asset. The first is the Law Commission’s model—the ‘Things’ model - that there is a controllable thing ‘out there’ on the blockchain which has properties or characteristics analogous with tangible objects. The second model—the ‘Rights model’—is that all there is a right, albeit a right tethered to an ideational object in the same way in which copyright is tethered to, and makes no sense without, the ‘work’. On this model there are no sensible analogies with tangible objects. The article adopts the wide view of choses in action and the ‘Rights’ model of crypto-asset. 

However, there is another strand to the paper to the effect that crypto-assets can be effectively protected even if seen as a chose in action. Part of the Law Commission’s argument in favour of a tertium quid—a third category of personal property—was that choses in action cannot be stolen, but crypto-assets can. Further they argued in favour of the development of a type of conversion action to protect ownership or control of crypto-assets in cases where they are sent to a burn address from which by design they cannot be recovered. Existing scholarship has identified several practical issues with how conversion might work (or not) in the digital context, but while conversion of bitcoin seems stymied by Yuen v Li—at least in England and Wales—the question of the private law protection of such assets by conversion remains live in Australia and in England we now know only what the law is not. We do not know what it is—what positive rights to protect their property an owner of a bitcoin has. 

The article argues that it is not true to say that a chose in action cannot be stolen. Shares can be. This is the result of regulations 35–36 of the Uncertificated Securities Regulations. The upshot that a PADI (‘Properly Authenticated Dematerialisation Instruction’) instructing a transfer of title will always be ‘attributable’ to the transferor. Under regulation 35(8), the transferee without actual notice of the defect, is not then liable in damages ‘or otherwise’ to anyone caused loss by the fraud or defect. Since only the registered legal owner can issue the relevant transfer instruction and the transferee is entitled to accept this, the transferee is in the same position as a transferee of a negotiable instrument. This has never been seriously doubted. The Court of Appeal decision in Bland v Keegan [2024] is to similar effect. There, Jeanette Keegan, whose son Darren ran the company, transferred half her shares to Julie when Julie married Darren. Julie and Darren later divorced, and Julie purported to sign a transfer document transferring Jeanette’s remaining 50 shares to her (Julie) signing it J Keegan. She then wound up the company whereupon Jeanette sued, arguing the transfer never happened and the appointment of liquidators was void. Jeanette lost. The register—which showed Julie as owner—could not simply be ignored and the court did not retrospectively rectify it. Julie had in effect ‘stolen’ Jeanette’s membership of the company. Crypto-assets are analogous. Just as third parties are entitled to assume that the company register is correct as a record of ownership, so they should be able to take the blockchain as presumptively correct as a record of ownership. Yet, compensation to the victim when a crypto-asset is stolen should be available from the wrongdoer. 

The point for our purposes is that there is no protection gap here. A claim based on breach of the owner of the crypto-asset’s (Hohfeldian) right that others not interfere with his (Hohfeldian) liberty to make use of the various technical features of his crypto-asset can, and should, be constructed, including a need for the defendant to have some degree of knowledge that he was interfering with that right. This can be done consistently with the denial of protection in conversion in Yuen v Li, and its hoped-for rejection by the High Court of Australia, and it can be done without worrying about relativity of title, conversion, the tertium quid or any of the Law Commission’s other proposals. 

Duncan Sheehan is a Professor of Business Law, University of Leeds.