High Court Ruling on USDT Stablecoin as Property

The High Court of Justice for England and Wales has made a significant ruling regarding Tether’s USDT stablecoin, asserting that it can be classified as property under English law. This ruling comes at a pivotal moment, just after the U.K. government initiated legislative efforts to define the status of cryptocurrencies more clearly. This legal clarification is essential as it establishes a framework for how digital assets can be treated in various legal contexts, especially concerning ownership, fraud, and trust.

Richard Farnhill, a deputy high court judge, articulated in the court filing, “USDT attract property rights under English law.” He elaborated that USDT can be traced and can serve as trust property, similar to traditional forms of property such as real estate or personal belongings. This ruling is pivotal because it acknowledges the legitimacy of cryptocurrencies in a legal landscape that has often viewed them with skepticism.

The Case Behind the Ruling

The case that led to this landmark ruling was brought forth by Fabrizio D’Aloia, who claims to be a victim of a cryptocurrency scam involving substantial financial losses. D’Aloia alleges that he was misled into transferring cryptocurrencies, specifically USDT and Circle’s USDC, amounting to approximately £2.5 million (around $3.3 million), to an unidentified defendant. This case highlights the vulnerabilities that individuals face in the rapidly evolving cryptocurrency market, where scams and fraudulent activities are increasingly common.

• Defendants: The case lists seven defendants, including well-known entities such as the crypto exchange Bitkub and Binance, which is recognized as the largest crypto exchange by trading volume. However, the court filing notes that the case against Binance has been settled.
• Allegations: D’Aloia claims that the unidentified scammer manipulated him into transferring funds, which were subsequently funneled through various blockchain wallets. The final withdrawal of these funds occurred as fiat currency through platforms like Gate and Bitkub.

Legislative Context

The U.K. government has recently introduced a bill that seeks to clarify the legal status of cryptocurrencies, positioning them as property rather than mere financial instruments. This bill, crafted by the independent statutory body known as the Law Commission, aims to establish a comprehensive regulatory framework for digital assets. The legislation is crucial, as it outlines the treatment of cryptocurrencies in legal disputes and the rights of individuals and businesses dealing with these assets.

Farnhill’s ruling aligns with the assertions made in this legislative proposal, emphasizing that cryptocurrencies do not fit neatly into traditional categories of property. They are neither “things in possession,” such as physical items like cars and cash, nor “things in action,” which typically refer to rights such as debts or shares. However, the judge confirmed that cryptocurrencies, including USDT, are indeed considered property, which opens the door for legal protections and clearer ownership rights.

Outcome of the Case

Despite the ruling in favor of recognizing USDT as property, the judge ultimately ruled against D’Aloia in his claim against Bitkub. The court determined that D’Aloia had no valid claim against the company, as Bitkub had not received any funds from him directly. This outcome underscores the complexities involved in cryptocurrency transactions and the legal challenges that can arise when dealing with digital assets.

• Aux Cayes Fintech: D’Aloia’s claim against Aux Cayes Fintech, another crypto trading platform, was also dismissed, or “struck out,” according to the court documents. This dismissal further complicates D’Aloia’s pursuit of justice in this case.

This case serves as a critical reminder of the importance of regulatory clarity in the cryptocurrency space. As digital currencies continue to grow in popularity, the need for robust legal frameworks that protect consumers and define property rights will become increasingly vital. The ruling by the High Court not only sets a precedent for future cases involving cryptocurrencies but also reflects a broader shift in how legal systems around the world are beginning to recognize and adapt to the realities of digital assets.