UK High Court Classifies Tether as Property in Landmark Ruling

TLDR:

• UK High Court ruled Tether (USDT) is legally property under English law
• First full trial judgment on cryptocurrency’s legal status in UK
• Ruling aligns with recent UK bill clarifying crypto as “personal property”
• Case involved tracing stolen crypto through exchanges and mixers
• Court acknowledged USDT can be traced in mixed pools, but evidence was insufficient in this case

The United Kingdom High Court has made a groundbreaking decision, ruling that the stablecoin Tether (USDT) is legally recognized as property under English law.

This landmark judgment, delivered on September 12, 2024, marks the first time a UK court has ruled on the legal status of cryptocurrency after a full trial.

Deputy Judge Richard Farnhill of the High Court of Justice stated in his ruling that “USDT attracts property rights under English law.”

He further clarified that Tether is “a distinct form of property not premised on an underlying legal right” and can be subject to tracing and trust claims, similar to other forms of property.

This decision came in a case brought by Fabrizio D’Aloia, a victim of fraud who sought to recover stolen cryptocurrencies, including 400,000 USDT.

The stolen funds had been transferred through various crypto exchanges after being laundered through crypto mixers.

While the court acknowledged the fraud, it ruled that D’Aloia failed to provide sufficient evidence linking his stolen USDT to the wallet of Thai exchange BitKub, which was named in the suit.

The ruling aligns with a 2019 judgment from the same court that supported the classification of cryptocurrencies as property, though that case 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.

Interestingly, this court decision came just one day after the UK government introduced new legislation aimed at clarifying the legal status of digital assets.

The bill seeks to define non-fungible tokens (NFTs), cryptocurrencies, and carbon credits as “things” and “personal property” under the nation’s property laws.

The UK has been ramping up its regulatory efforts in the cryptocurrency space, particularly following some high-profile bankruptcies in the previous year.

The Financial Conduct Authority (FCA) oversees crypto activities in the country, focusing on anti-money laundering measures and consumer protection.

Last year, the FCA implemented new rules requiring crypto firms to register with the financial regulator and have their marketing materials approved by an FCA-authorized firm.

This ruling has significant implications for the digital asset industry. By classifying Tether as property, the court has provided a clear guideline for the treatment of other forms of digital assets, such as stablecoins, in legal disputes.

This offers broader protection for cryptocurrency investors and could potentially lead to further evolution of laws governing cryptocurrency operations and conflict resolution in the digital asset space.

The decision also impacts cryptocurrency holders, who may now have more confidence in holding assets like Tether, knowing they have legal recourse in cases of fraud or theft.

Legal experts note that this case underscores the importance of clear, well-documented evidence when making claims involving cryptocurrency transactions. It also serves as a lesson for analytic report providers to ensure evidence is clearly articulated for courts.