In a score for Aussies, a judge has green-lighted the use of cryptocurrency such as Bitcoin to secure legal expenses. The case could set a precedent for courts in other jurisdictions to similarly approve cryptocurrency as collateral.
The New South Wales District Court has given the okay to a plaintiff in a defamation lawsuit to use $20,000 worth of cryptocurrency holdings to secure a legal bill. [Australian Associated Press] The funds will cover the defendant’s legal expenses should the plaintiff lose or drop the complaint, a decision that was made in response to a demand for the plaintiff to earmark the funds in an escrow-type account controlled by the courts.
While the defendant’s legal counsel argued that cryptocurrencies are too volatile, cooler heads in the court system prevailed. And while seemingly not disagreeing with the roller coaster ride that Bitcoin can take investors on, Judge Judith Gibson, who was appointed to the court in 2001, instead decided to join the cryptocurrency bandwagon, reportedly saying:
“However, this is a recognized form of investment.”
Cheers could be heard across Crypto Twitter in response.
— Lark Davis (@TheCryptoLark) February 29, 2020
Bitcoin: Pros and Cons
In the spirit of transparency, the plaintiff has agreed to provide monthly statements for the “account” to the defendant’s team. The use of the term “account” suggests the funds are in the hands of a cryptocurrency exchange. What could go wrong? After all, we just passed the five-year mark from the Mt. Gox debacle in which 850,000 bitcoins suddenly disappeared.
Perhaps Judge Gibson is no stranger to not your keys, not your coins, as she has required that the plaintiff alert the defendant’s representative should the value of the account dip below $20,000.
Additionally, one month in the cryptocurrency market could be like a year in the traditional financial markets. So the court might want to be prepared for some sticker shock. Since Feb. 18, the Bitcoin price has gone from hovering above the $10,000 threshold to currently trading at about $8,648. And it’s known for precipitous declines that see the flagship cryptocurrency fall several percent in a matter of minutes.
Still, Aussies appear to agree that when it comes to cryptocurrencies, the pros outweigh the cons. Australia in some ways has been an early mover in the blockchain space, with the government having launched a “national blockchain roadmap” in which it seeks to demonstrate how the blockchain can bolster the economic value of various sectors, using agriculture, university, and finance to prove its point. According to the report,
“Australia can contribute to an estimated global annual business value of over US$175 billion by 2025 generated by blockchain.”
So perhaps it’s no surprise that the district court would give cryptocurrencies the benefit of the doubt in this case.