One of the main questions for those who intend to register a cryptocurrency company in the EU or US is the legal status of cryptocurrencies. To help them figure it out, we’ve decided to analyze several lawsuits involving cryptocurrencies. In the first one, a court in England rendered a judgement on the preservation of assets stored in an account on a cryptocurrency trading platform. In the second one, the same court decided to suspend the proceedings because Bitcoin & Ethereum were traded on different trading platforms.
In the first case, the question of whether a plaintiff could claim ownership of Bitcoin as personal property was raised. After receiving an email, the plaintiff transferred one hundred Bitcoins to the sender, who in turn transferred eighty Bitcoins to another individual.
Following analysis of the Bitcoin blockchain, the eighty Bitcoins were traced back to a digital wallet owned by Coinbase, a digital currency exchange platform.
The court refused to issue a freeze order against the “unknown persons” because there was no sufficient reason to believe that the risk of bitcoin dispersal was high enough to meet the required threshold or constitute grounds for establishing a cryptocurrency exchange in the EU or US. The judge also expressed reservations about whether the freezing order would be effective in this situation. Instead, they issued an order whereby the assets were to be stored in a digital wallet, the reason being that the plaintiff had passed the lower threshold.
In the second case, the plaintiff transferred the cryptocurrencies to the defendant on the grounds that they would engage in cryptocurrency trading on their behalf. After the plaintiff became concerned that the company no longer had their funds, the plaintiff demanded a freeze order.
The court ruled that there was a serious risk of the transferred cryptocurrency being expended, since the evidence presented by the defendants didn’t indicate that the plaintiff's funds were still in their custody. It was also noted that the defendants didn’t contest the plaintiff's property claim to the funds, nor claimed that cryptocurrency wasn’t a form of ownership. Based on this, the court was able to render such a decision, making launching a cryptocurrency business in the EU or US an even more attractive option
Cryptocurrency: Legal Status
Until recently, the question of whether cryptocurrency could qualify as property, and not just data or information, remained wide open for those who intended to establish a cryptocurrency business. In the traditional sense, cryptocurrency doesn’t fall under any category of ownership, the reason being that the intangible nature of digital currency implies no “physical” ownership.
There’s only a handful of examples of the recognition of other forms of ownership, the 1977 Patent Act being the most obvious one. In fact, it has become a rather important question for individuals interested in registering a company for crypto activity. In and of itself, cryptocurrency isn’t legal tender; however, it does have the fundamental characteristic of intangible property.
If investing in cryptoassets in Great Britain is something you’re going to do in the near future, please note that the issue of whether cryptocurrency qualifies as property has recently been clarified. It was confirmed that cryptoassets have all the signs of ownership & should, therefore, be treated as such.
If you’re interested in starting a cryptocurrency business & need legal advice on licensing cryptocurrency activities, you should definitely contact IQ Decision UK. Our team of experts will be happy to give you a hand with all cryptocurrency-related matters, including getting permission to engage in cryptocurrency activities.