UK High Court designates Tether's USDT as property, paving the way for digital assets under English law.
Farnhill rules USDT as property; D'Aloia's fraud case prompts landmark decision on cryptocurrency tracing.
Legal precedent set as UK court recognizes USDT stablecoin as property, aligning with new crypto legislation.
Tether's USDT stablecoin has been officially defined as property in a significant verdict by the High Court of Justice of England and Wales. This crucial judicial ruling came shortly after the UK government passed legislation establishing cryptocurrency as property under English law. Deputy High Court Judge Richard Farnhill stated that USDT, as a digital asset, possesses property rights, similarly to traditional forms of property.
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The ruling emerged from a case involving Fabrizio D’Aloia, who alleged that he was defrauded of approximately 2.5 million pounds ($3.3 million) worth of cryptocurrency, including USDT and USDC. D'Aloia contended that the cryptocurrencies were channeled through multiple blockchain wallets and subsequently withdrawn as fiat currency by the fraudsters through various exchanges.
Property Law Implications
Judge Farnhill’s decision aligns with the principles set out by the Law Commission in a 2023 report which advocated for digital assets to be recognized as property. This acknowledgment permits cryptocurrencies like USDT to be subject to tracing and to be included as trust property, similar to physical and intangible assets. The ruling establishes a framework for how digital assets are to be treated under property laws, potentially influencing future cases and legislative developments.
The judge cited a "strong line of authority" from previous judgments, asserting that cryptocurrencies have consistently been recognized as property by the court. This consistency in judicial approach underscores the evolving understanding and integration of digital assets within the legal fabric of the UK, marking a step forward in formalizing the status of cryptocurrencies in financial and legal transactions.
Legal Challenges and Court Decisions
In the detailed proceedings, the court examined whether Thai crypto exchange Bitkub could be held liable for the mishandling of D’Aloia’s transferred USDT. The judge concluded that Bitkub was not unjustly enriched as there was insufficient evidence to prove that the mixed USDT could be traced back to Bitkub’s wallet. As a result, the claims against Bitkub were dismissed, highlighting the complexities involved in tracing cryptocurrencies through mixers.
Additionally, D’Aloia’s broader claims involving other exchanges and parties remain unresolved, with further legal evaluations pending. The court's cautious approach in dealing with mixed crypto assets illustrates the challenges faced by legal systems in adapting to the nuances of digital currency transactions, particularly when addressing issues of fraud and asset recovery.
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