The United Kingdom High Court has ruled that the stablecoin Tether (USDT) is legally recognized as property under English law.
The ruling marks the first full trial judgment in the UK on the legal status of cryptocurrency and comes shortly after the government introduced new legislation aimed at clarifying the legal status of cryptocurrencies.
The case involved a fraud victim whose stolen cryptocurrencies, including Tether, were transferred through various crypto exchanges after being laundered through crypto mixers.
USDT Attracts Property Rights, Court Rules
The court’s decision to classify Tether as property was part of a preliminary issue in the lawsuit brought by the victim.
In the ruling delivered on September 12, Deputy Judge Richard Farnhill of the High Court of Justice stated that “USDT attracts property rights under English law.”
He further elaborated that Tether is “a distinct form of property not premised on an underlying legal right” and is subject to tracing and trust claims, similar to other types of property.
The judge also referred to a 2019 judgment from the same court, which supported the classification of cryptocurrencies as property, though that case did not go to trial.
The ruling aligns with the 2023 report by the England and Wales Law Commission, which also classified digital assets as property.
The case was brought by fraud victim Fabrizio D’Aloia, who sought to recover stolen assets, including 400,000 USDT that had been traced to the Thai crypto exchange BitKub.
However, D’Aloia was unable to convince the court that BitKub had been “enriched” by receiving 46,291 USDT allegedly traced from his stolen funds.
Judge Farnhill ruled that while D’Aloia had indeed been defrauded, he could not conclusively prove that BitKub had received his Tether due to the use of crypto mixers, which obscured the flow of funds.
Nicola McKinney, a partner at Quillon Law representing BitKub, explained that the judge acknowledged the possibility of identifying assets in mixed pools but concluded that D’Aloia had failed to provide sufficient evidence linking his USDT to BitKub’s wallet.
The ruling emphasized the importance of clear, well-documented evidence when making claims involving cryptocurrency transactions.
UK Introduces Crypto Legislation
The decision comes just one day after the UK government introduced a new bill aimed at clarifying the status of digital assets, including non-fungible tokens (NFTs), cryptocurrencies, and carbon credits, as “things” and “personal property” under the nation’s property laws.
The UK has been among the countries that have ramped up regulatory efforts following some high-profile bankruptcies last year.
The Financial Conduct Authority (FCA) oversees crypto activities, focusing on anti-money laundering measures and consumer protection.
Last year, the FCA implemented new rules that require crypto firms to register with the financial regulator and have their marketing materials approved by an FCA-authorized firm.
Key updates include exchanges providing clear warnings to customers about the risks associated with crypto investments.
The FCA has warned that failure to comply can result in criminal charges, including unlimited fines and up to two years’ imprisonment, for domestic and overseas exchanges operating in the UK.
As a result, leading crypto exchanges Coinbase, Revolut, and Binance have updated their mobile and web applications to comply with the new regulations.
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