In a landmark decision, the United Kingdom High Court has ruled that the stablecoin Tether (USDT) is legally recognized as property under English law. This ruling is the first full trial judgment in the UK concerning the legal status of cryptocurrency and comes shortly after the introduction of new government legislation clarifying the legal standing of digital assets.
Court Declares Tether as Property
The case that led to this ruling involved a fraud victim whose stolen cryptocurrencies, including Tether, were laundered through various exchanges and crypto mixers. The High Court’s Deputy Judge Richard Farnhill ruled on September 12 that “USDT attracts property rights under English law.” He further stated that Tether is a “distinct form of property not premised on an underlying legal right” and, like other forms of property, is subject to tracing and trust claims.
This ruling reinforces previous legal perspectives on cryptocurrencies as property, aligning with a 2019 judgment from the same court, which supported the classification of digital assets but did not go to trial. It also corresponds with the 2023 report by the England and Wales Law Commission, which classified digital assets as property.
Fraud Case Outcome and Court’s Rationale
The case was brought by fraud victim Fabrizio D’Aloia, who sought to recover his stolen cryptocurrencies, including 400,000 USDT that had been traced to the Thai crypto exchange BitKub. However, despite proving he was defrauded, D’Aloia could not convince the court that BitKub had been “unjustly enriched” by receiving the stolen USDT. The judge ruled that the use of crypto mixers had obscured the flow of funds, making it impossible to conclusively prove that BitKub held D’Aloia’s Tether.
Nicola McKinney, representing BitKub, explained that while the court recognized the potential to identify assets within mixed pools, D’Aloia had failed to provide sufficient evidence linking his USDT to BitKub’s wallet. This emphasizes the critical need for clear and well-documented evidence in cryptocurrency-related legal claims.
New UK Crypto Legislation
The ruling comes just one day after the UK government introduced a new bill aimed at clarifying the legal status of digital assets. This legislation covers non-fungible tokens (NFTs), cryptocurrencies, and carbon credits, recognizing them as “things” and “personal property” under the nation’s property laws.
The UK has ramped up its regulatory efforts in response to high-profile crypto bankruptcies in 2022. The Financial Conduct Authority (FCA) now oversees crypto activities, focusing on anti-money laundering measures and consumer protection. Last year, the FCA mandated that crypto firms register with the financial regulator and have their marketing materials approved by an FCA-authorized firm. Additionally, crypto exchanges are now required to warn customers about the risks associated with digital asset investments.
Failure to comply with these regulations can lead to severe penalties, including criminal charges, unlimited fines, and up to two years in prison. Leading crypto exchanges such as Coinbase, Revolut, and Binance have already updated their platforms to meet the new requirements.
This ruling and the recent legislative developments mark significant progress in the UK’s efforts to provide legal clarity and regulatory oversight for cryptocurrencies, helping to define their place in the country’s financial ecosystem.
