In a historic ruling, the United Kingdom High Court has classified stablecoin Tether (USDT) as property. This decision marks the first time English law has directly addressed the legal status of cryptocurrency following a full trial.
The ruling, delivered on 12 September by High Court Deputy Judge Richard Farnhill, came as part of a case brought by a fraud victim whose stolen cryptocurrency — including USDT — had been laundered through various exchanges using crypto mixers.
Cryptocurrency as Property Under English Law
In his judgment, Farnhill affirmed that “USDT attract property rights under English law.” He described Tether as “a distinct form of property not premised on an underlying legal right,” meaning that it could be subject to tracing, similar to other forms of property, and could also constitute trust property.
The judge referred to an established line of authority supporting the classification of cryptocurrencies as property, citing a 2019 judgment in the same court. He also noted the alignment with the England and Wales Law Commission’s 2023 report, which recognised digital assets as property under English law.
Implications for NFTs and Digital Assets
The decision follows the UK government’s announcement of a new bill intended to clarify that non-fungible tokens (NFTs), cryptocurrencies, and carbon credits will be treated as “personal property” under UK law. This ruling on Tether further strengthens the legal foundation for digital assets in the UK.
Fraud Case Highlights Legal Complexities of Crypto
The case that led to this landmark ruling was brought by Fabrizio D’Aloia, a fraud victim who transferred $3.3 million (£2.5 million) in crypto assets to fraudsters. D’Aloia sought to recover his stolen USDT, some of which he alleged had passed through the Thai exchange BitKub.
However, D’Aloia’s case against BitKub was dismissed by the court. The judge ruled that while USDT can be traced even in mixed pools, D’Aloia had failed to provide sufficient evidence that any of his stolen funds had reached BitKub’s wallets. This outcome underscores the difficulties of tracing digital assets through crypto mixers.
related reading：UK Introduces Bill to Recognise Digital Assets as Personal Property
No Legal Basis for Breach of Trust Claim
In his ruling, Farnhill acknowledged the fraud but noted that D’Aloia had not demonstrated any direct connection between his assets and BitKub. As a result, he ruled that there was no “defective transaction” to reverse. Without clear evidence linking D’Aloia’s funds to BitKub, the claim for breach of trust could not succeed.
Legal experts, including Nicola McKinney of Quillon Law, explained that while USDT could, in theory, be traced through mixed pools, D’Aloia could not meet the required standard of proof to trace his assets to BitKub.
Lessons for Legal Teams and Evidence Providers
Matt Green, head of blockchain and digital assets at Lawrence Stephens, noted that the case highlights the importance of clearly articulated evidence in cases involving complex digital assets. He urged legal teams to thoroughly understand the facts to build strong proprietary claims and address issues related to mixing cryptocurrencies.
D’Aloia’s case also named several other parties, including Binance, Polo Digital Assets, Gate Technology Corp, Aux Cayes Fintech, and “persons unknown,” a common practice in cases involving fraudsters. The court has yet to make a decision on a summary judgment application, with further orders expected at a later date.
A Step Forward, But Challenges Remain
While the court’s ruling solidifies the legal status of Tether and other digital assets under UK law, the challenges of tracing and recovering stolen cryptocurrency remain a significant hurdle. The case demonstrates the complexity of establishing legal claims in a rapidly evolving digital landscape.
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