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The High Court has declined to extend the traditional tort of conversion to crypto assets, holding that it was bound by existing authority to confine the tort to tangible goods despite the statutory recognition of a potential third category of property: Yuen v Li [2026] EWHC 532 (KB),
Conversion is a strict-liability law tort that is committed where a defendant deals with another’s goods in a manner inconsistent with the owner’s rights, for example by taking, disposing of, or asserting control over them without authority. In OBG Ltd v Allan [2007] UKHL 21, the House of Lords confirmed that conversion is confined to tangible property ("things in possession") capable of physical control. It does not apply to intangible property or rights ("things in action"), such as contractual rights, which cannot be possessed or physically interfered with in the manner required by the tort.
Since OBG v Allan was decided, the Property (Digital Assets etc) Act 2025 ("2025 Act") has established that there may be a "third category" of property which is neither a "thing in possession" nor a "thing in action". This confirms that crypto assets, and other digital assets, are capable of being property, even if they do not fall within either of the two traditional categories. However, the court in the present case did not accept that the House of Lords' reasoning in OBG v Allan would permit the tort of conversion to be extended beyond "things in possession" to encompass the new third category. Therefore, whether crypto assets fall into the traditional category of "things in action" or the new third category, they are not covered by the tort of conversion.
This does not mean that owners of digital assets lack enforceable property rights. As the case itself demonstrates, alternative claims, such as for unjust enrichment or proprietary restitution, may be available. Further, the decision does not exclude the possibility that the courts may be able to develop a new cause of action by analogy with the tort of conversion to deal with wrongful interferences with third category things – though the judge comments that the need for such a cause of action is currently unclear given the scope of other causes of action and remedies.
Ultimately, the judgment illustrates a legal landscape in flux, as both courts and legislators grapple with the implications of emerging technologies for established legal principles and concepts of property.
Background
The claimant was the owner of a substantial Bitcoin holding (over 2,300 Bitcoin, valued at around £160–£180 million). His private key was contained in a “cold wallet” on a physical device protected by a PIN. However, the wallet could also be recreated on a separate devices by any person with access to the claimant's "seed phrase" (a randomly generated set of 24 words).
The claimant alleged that his estranged wife, assisted by her sister (the first and second defendants respectively), obtained access to the seed phrase and transferred the Bitcoin without his consent, dispersing it across numerous blockchain addresses.
The claimant brought proceedings alleging various causes of action including conversion and trespass to goods and (by amendment) unjust enrichment, breach of confidence and misuse of private information, causing loss by unlawful means and proprietary restitution/constructive trust.
The defendant filed an application to strike out the claims based on conversion and trespass to goods.
The defendant accepted that crypto assets are property, but argued that the claims for conversion and trespass to goods had no real prospect of success as the crypto assets were not tangible assets and thus these torts could not apply.
The claimant argued that the law was in a state of flux following the 2025 Act, and the common law could develop these torts to recognise the new third category of property, including digital property – as other jurisdictions (eg the U.S., Canada, New Zealand) had done.
Decision
The High Court (Cotter J) granted the strike‑out application, holding that the tort of conversion cannot apply to crypto assets.
Cotter J noted that, historically, English law recognised two distinct categories of property, things in possession (tangible things) and things in action (legal rights or claims enforceable by action). In OBG v Allan, the House of Lords held that the strict‑liability tort of conversion was confined to the former category.
In its 2023 report "Digital Assets", the Law Commission recognised that the law had moved toward the recognition of a third category of things which did not fall easily within the two traditional categories, and the 2025 Act was introduced to confirm that a thing – including a digital asset – may be the object of personal property rights regardless of whether it falls within those two categories.
However, the Law Commission's report had expressly acknowledged that third‑category assets are, under the existing law, "incapable of being converted". Unlike the majority of causes of action, which apply equally to things in possession and things in action, and which can be applied to the third category of property within further reform, the Law Commission stated that conversion lies in respect of dealings with things in possession, and the courts have held that intangible property cannot form the subject matter of the tort. While the Law Commission identified policy reasons why third category assets might warrant protection analogous to conversion (in particular to deal with a lacuna in the law relating to the unauthorised burning of digital tokens) it stopped short of recommending that conversion itself be extended, noting that in any event such an extension "would most likely need to be by way of statute".
Cotter J accepted that there may be scope for the development of a new or analogous cause of action drawing on principles of tortious liability – though he said the need for such a cause of action was currently unclear given the scope of other causes of action and remedies. However, he held that OBG v Allan constituted a "clear block" to extending the existing tort of conversion to digital assets.
As for trespass to goods, Cotter J noted the defendant's submission that the tort cannot apply to intangible property such as crypto-assets. The claimant argued, however, that the act of transferring the Bitcoin may have involved touching the "cold wallet" on a physical device or altering property/data. Cotter J was sceptical as to whether this cause of action could be made out, given that the claimant did not appear to allege that the defendant needed to touch the wallet or change the data on it in order to move the Bitcoin. However, rather than striking out the claim, he allowed the claimant seven days to consider if he would like to apply to amend the Particulars of Claim to expand the basis of the claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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