TLDR
- UK High Court ruled Tether (USDT) is property under English law
- First post-trial ruling on cryptocurrency status in English law
- Judge: USDT can be subject to tracing and trust property
- Ruling aligns with UK government bill classifying crypto as personal property
- Plaintiff failed to prove BitKub exchange was enriched by receiving traced USDT
The United Kingdom High Court has made a groundbreaking decision in the world of cryptocurrency, ruling that the stablecoin Tether (USDT) is considered property under English law.
This marks the first-ever ruling on the treatment and status of cryptocurrency after a full trial in the UK legal system.
The case arose from a fraud victim, Fabrizio D’Aloia, who brought legal action after his stolen cryptocurrency, including Tether, was transferred through various exchanges and crypto mixers.
Deputy Judge Richard Farnhill presided over the case and delivered the verdict on September 12, 2023.
In his ruling, Judge Farnhill stated that USDT tokens “attract 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 can constitute trust property in the same way as other property.”
This decision aligns with a 2019 judgment from the same court, which also classified cryptocurrencies as property. However, the previous ruling was not made at trial, making this recent verdict more significant.
The judge also noted that the ruling is consistent with the England and Wales Law Commission’s position in a 2023 digital assets report, which marked cryptocurrencies as property.
Interestingly, the court’s decision came just one day after the UK government introduced a bill aimed at clarifying that non-fungible tokens (NFTs), cryptocurrencies, and carbon credits are considered “things” and “personal property” under property laws. This timing highlights the growing recognition of digital assets within the UK legal framework.
While the ruling on Tether’s status as property is a landmark decision, the court did not find in favor of the plaintiff on all counts.
D’Aloia failed to prove that the Thai cryptocurrency exchange BitKub was “enriched” by receiving 400,000 USDT, of which 46,291 USDT was allegedly traced from the fraudsters who had stolen from D’Aloia.
Judge Farnhill acknowledged the fraud but was not convinced that a BitKub wallet had received D’Aloia’s USDT due to the use of crypto mixers, which obscure the origin of funds.
The judge concluded that while USDT could, in principle, be identified in mixed pools, D’Aloia could not provide sufficient evidence to trace his USDT to the relevant BitKub wallet.
This aspect of the ruling highlights the challenges in tracing cryptocurrency transactions, especially when mixers are involved.
It serves as a reminder for both legal teams and blockchain analysis providers to ensure that evidence is clearly articulated and understood by the courts.
The case involved a total of 2.5 million British pounds ($3.3 million) transferred by D’Aloia to the fraudsters across several transactions. In addition to BitKub, D’Aloia named other parties in the suit, including Binance, Polo Digital Assets, Gate Technology Corp, Aux Cayes Fintech, and the unidentified scammers referred to as “persons unknown.”
