A judge in Singapore has examined whether cryptocurrency is money or not.
As the Algorand Foundation attempts to recover assets from Three Arrows Capital, the case highlights the role of legal rulings in settling the cryptocurrency case.
Is cryptocurrency money?
One of the questions that is relevant to a number of court proceedings going on around the world is whether cryptocurrency is considered “real” money in a legal context.
In Singapore, the bankruptcy of Three Arrows Capital after its dramatic collapse last year created a mountain of lawsuits. As clients of the bankrupt company line up to stake their claims on its assets, questions remain about what kind of assets can be seized.
On March 30, the judge presiding over a lawsuit brought by the Algorand Foundation outlined the challenge faced by potential creditors.
Demanding $53.5 million, Algorand’s lawyer argued that the stablecoin cache should be considered a sum of money. After all, Singapore admits to putting forex into this liquidation procedure. Why not one of the most popular stablecoins in the world?
Arbitration rules that crypto is not “real” money
In this case, Justice Vinodh Coomaraswamy questioned whether the large community of USDC users was sufficient to justify its status as a currency, thus granting creditor Algorand rights.
like mentioned At the Singapore Law Watch, the judge asked “What if you had (a community) in the world that used seashells as their internal medium of exchange? Would Singapore courts have to recognize that as money?”
Judge Coomaraswamy ended up denying Algorand’s request. He did not accept the foundation’s argument that cryptocurrencies stand on the same legal basis as fiat currencies. Although he acknowledged that Algorand may still have a claim to the assets in question.
In his decision, he said, “The word indebtedness, in my opinion, should require debt in paper currency.”
More international alignment is required
The complex, cross-border nature of Three Arrows’ liquidation points to a growing need for a more coherent international legal doctrine. Currently, the cryptocurrency situation remains uncertain in many countries.
To this end, efforts are being made around the world to better define it in law. Going forward, these efforts may help answer the question of whether cryptocurrency is money once and for all.
In the United Kingdom, for example, the Financial Services and Markets Bill currently making its way through Parliament seeks to bring stablecoin payments under the purview of electronic money regulations.
Similarly, the European Markets in Crypto Assets Regulation (MiCA) develops a detailed classification of different types of crypto assets. The legislation will provide a set of definitions that can be applied in future disputes. For example, distinguishing between stablecoins that are backed by fiat currencies and those that maintain their peg via some other mechanism.
In the Singaporean context, the United Kingdom is an important example because the two countries share similar legal and judicial traditions. Meanwhile, the EU’s multi-state nature could establish MiCA as a definitive global standard.
Regulations are often seen as a silver bullet that can resolve various legal uncertainties in the crypto sector. But the truth is, even the best regulations in the world can’t keep companies out of the courts. And there will always be institutional conflicts that refuse any simple resolution.
Despite having strict protections for retail customers, the crypto sector in Singapore is still beset by legal dilemmas. Given the interconnected and boundless nature of many cryptocurrency-focused companies, cases like the Three Arrows liquidation could prove decisive.
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