(b) What is cryptocurrency?
[21] At the outset it is useful to provide a definition of cryptocurrency generally.
Counsel seem to accept that a most helpful description is found in a British report of
the “UK Jurisdiction Taskforce” entitled Legal Statement on Cryptoassets and Smart
Contracts.
2
 The report was authored by four barristers, experts in this field and
considers broadly the legal status of cryptoassets and, in particular, whether the law
treats them as property. In the report, the authors provide what is a useful and nontechnical summary of cryptoassets or cryptocurrency. This definition follows the
heading in the report “What is a Cryptoasset?” It explains:
24. In October 2008, the pseudonymous Satoshi Nakamoto published his
now-famous paper Bitcoin: A Peer-to-Peer Electronic Cash System.
Observing that commerce on the Internet relied almost exclusively on
financial institutions serving as trusted third parties, Nakamoto
proposed a new electronic payment system “based on cryptographic
proof instead of trust”, with digital tokens – bitcoins – taking the place
of traditional currency. The first bitcoin came into existence in
January 2009, not coincidentally at the height of the global banking
crisis.
25. Many other systems have been developed since then to implement
commercial applications using cryptographic techniques. The market
continues to expand as new applications and new techniques are
explored.
26. Most applications involve dealings in assets of some kind, which
therefore have to be represented digitally within the system. We use
the term cryptoasset to refer generally to such a representation.
However, that should not be understood as a term of art. Because of
the great variety of systems in use and kinds of assets represented
(ranging from purely notional payment tokens such as bitcoins to real-

2 UK Jurisdiction Taskforce Legal Statement on Cryptoassets and Smart Contracts (The LawTech
Delivery Panel, November 2019) [Legal Statement on Cryptoassets and Smart Contracts] <
https://technation.io/news/uk-takes-significant-step-in-legal-certainty-for-smart-contracts-andcryptocurrencies/>.
world tangible objects) it is difficult to formulate a precise definition
of a cryptoasset and, given the rapid development of the technology,
that would not be a useful exercise. Indeed, there is no consistency
even in the nomenclature, with virtual and digital also widely used to
describe the kinds of things with which we are concerned.
27. Instead, we have set out to identify and describe, in general terms, the
features of cryptoassets that may be regarded as genuinely novel or
distinctive, as compared with conventional assets, so that we can then
consider whether and how those features might be relevant to issues
of legal and proprietary status.
28. A cryptoasset is ultimately defined by reference to the rules of the
system in which it exists. Functionally, it is typically represented by
a pair of data parameters, one public (in that it is disclosed to all
participants in the system or to the world at large) and one private.
The public parameter contains or references encoded information
about the asset, such as its ownership, value and transaction history.
The private parameter – the private key – permits transfers or other
dealings in the cryptoasset to be cryptographically authenticated by
digital signature. Knowledge of the private key confers practical
control over the asset; it should therefore be kept secret by the holder.
More complex cryptoassets may operate with multiple private keys
(multisig), with control of the asset shared or divided between the
holders.
29. Dealings in a cryptoasset are broadcast to a network of participants
and, once confirmed as valid, added to a digital ledger. The main
function of the ledger is to keep a reliable history of transactions and
so prevent double-spending, i.e. inconsistent transfers of the same
cryptoasset to different recipients. The ledger may be distributed and
decentralised, that is, shared over the network with no one person
having a responsibility for maintaining it, or any right to do so. A
common type of distributed ledger uses a blockchain, which
comprises blocks of transactions linked together sequentially, but
other models are also in use.
30. An important feature of some systems is that the rules governing
dealings are established by the informal consensus of participants,
rather than by contract or in some other legally binding way.
Consensus rules (employing methods such as proof-of-work or proofof-stake) may also determine which version of the distributed ledger
is definitive. The rules are self-enforcing in practice, even if not
enforceable in law, because only transactions made in compliance
with them and duly entered in the ledger will be accepted by
participants as valid.
31. Although not all systems possess all of them, we can therefore identify
the principal novel and characteristic features of cryptoassets as being:
(a) intangibility;
(b) cryptographic authentication;
(c) use of a distributed transaction ledger;
(d) decentralisation; and
(e) ruled by consensus.
32. It is those features that have given rise to much of the debate about
legal and proprietary status and on which we therefore focus our
analysis.
33. Some cryptoassets are intended to represent or are linked to
conventional assets external to the system, for example money or debt
obligations, tangible goods or land, a share or unit in a company or
fund, or a contractual right of some kind; those assets are sometimes
referred to as tethered, exogenous or off-chain. Such an external asset
is certainly property but what, if any, rights in it conferred on the
holder of the corresponding cryptoasset will depend on the contractual
structure or legal rules of the system. For the present, we are
concerned only whether the cryptoasset itself (the native or on-chain
asset) is property, as distinct from any other asset it might represent,
although we return to the relationship between on-chain and off-chain
assets below when we discuss whether cryptoassets can operate as
assets of title.
34. Many dealings in cryptoassets involve intermediaries such as brokers
or custodians; that is the case even in systems, such as Bitcoin, that
are designed to avoid the need for intermediation. What personal and
proprietary rights the principal may have against an intermediary will
depend on established rules of contract, tort and agency. That is
outside the scope of the present discussion.
(emphasis original, footnotes omitted)