A judge in Singapore has weighed in on 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 judgments in settling cryptocurrency’s status.
Is Cryptocurrency Money?
One question that has relevance to a number of ongoing court proceedings the world over is whether cryptocurrency counts as “real” money in a legal setting.
In Singapore, the insolvency of Three Arrows Capital following its dramatic collapse last year has created a mountain of litigation. As the bankrupt firm’s clients line up to stake their claims for its assets, questions remain concerning what kind of assets are up for grabs.
On March 30, the judge presiding over a claim brought by the Algorand Foundation summed up the challenge would-be creditors face.
Seeking 53.5 million USDC, Algorand’s lawyer argued that the cache of stablecoins should be considered a sum of money. After all, Singapore recognizes the status of foreign currencies in such liquidation proceedings. Why not one of the world’s most popular stablecoins?
Judge Rules That Crypto Isn’t ‘Real’ Money
In this instance, Justice Vinodh Coomaraswamy questioned whether the large community of USDC users is enough to justify its status as a currency, thus granting Algorand creditor’s rights.
As reported in Singapore Law Watch, the judge asked “What if you had [a community] in the world that used seashells as its internal medium of exchange? Would the Singapore courts have to recognize that as money?”
Justice Coomaraswamy ended up throwing out Algorand’s application. He did not accept the Foundation’s argument that crypto stands on the same legal footing as fiat currencies. Although he did acknowledge that Algorand may still have a claim to the assets in question.
“The word indebtedness, in my view, must require a debt which is in fiat currency,” he said in his decision.
More International Alignment Needed
The complex, cross-border nature of Three Arrows’ liquidation points to the growing need for a more coherent international legal doctrine. Currently, the status of cryptocurrency is still uncertain in many countries.
To that end, efforts to better define them in law are underway around the world. Going forward, these efforts may help to answer the question of whether cryptocurrency is money once and for all.
In the UK, for example, the Financial Services and Markets Bill currently making its way through parliament seeks to bring stablecoin payments within the remit of electronic money regulations.
Likewise, the EU’s Markets in Crypto Assets (MiCA) regulation develops a detailed taxonomy of different types of crypto assets. The legislation will provide a set of definitions that for application in future disputes. For instance, distinguishing between stablecoins backed by fiat and those that maintain their peg via some other mechanism.
In the Singaporean context, the UK is an important example because the two countries share similar legal and judicial traditions. Meanwhile, the multi-state nature of the EU could establish MiCA as a critical global standard.
Regulation is often posited as a silver bullet that can solve the crypto sector’s various legal uncertainties. But the truth is that even the best regulations in the world can’t keep businesses out of court. And there will always be corporate disputes that refuse any simple resolution.
Despite having strict protections in place for retail customers, Singapore’s crypto sector is still beset by legal dilemmas. Considering the interconnected and borderless nature of so many crypto-focused businesses, cases like the Three Arrows liquidation could prove decisive.
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