Singapore judge rules on crypto being money

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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 the status of cryptocurrency.

Is cryptocurrency money?

A relevant question for a number of ongoing legal proceedings around the world is whether cryptocurrency counts as real money within a legal framework.

In Singapore, the insolvency of Three Arrows Capital following its dramatic collapse last year has created a mountain of litigation. As clients of bankrupt businesses line up to claim their assets, questions remain about what type of assets to seize.

On March 30, the judge presiding over a lawsuit filed by the Algorand Foundation summarized the challenge facing potential creditors.

Searching for 53.5 million USDC, Algorands’ 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 most popular stablecoins in the world?

Judge Says Crypto Isn’t ‘Real’ Money

In this case, Judge Vinodh Coomaraswamy questioned whether USDC’s large community of users was sufficient to justify its status as a currency, thereby granting rights to Algorand’s creditors.

As reported in Singapore Law Watch, the judge asked What if you had [a community] in the world who used shells as a means of internal exchange? Should Singapore courts recognize this as money?

Judge Coomaraswamy ended up rejecting Algorands’ request. He did not accept the Foundations’ argument that crypto stands on the same legal footing as fiat currencies. Although he acknowledged that Algorand may still have a right to the assets in question.

The word debt, in my view, must require debt that is in fiat currency, he said in his ruling.

More international alignment needed

The complex and cross-border nature of the Three Arrows liquidation highlights 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 could help answer the question of whether cryptocurrency is money once and for all.

In the UK, for example, the Financial Services and Markets Bill currently before Parliament aims to bring stablecoin payments into the e-money regulatory framework.

Similarly, the EU Regulation on Crypto Asset Markets (MiCA) develops a detailed taxonomy of different types of crypto assets. The legislation will provide a set of definitions that will be applied in future litigation. For example, distinguish between fiat-backed stablecoins and those that maintain their peg through some other mechanism.

In the Singapore context, the UK is an important example as the two countries share similar legal and judicial traditions. Meanwhile, the multi-state nature of the EU could make MiCA an essential global standard.

Regulation is often touted as a silver bullet that can resolve the various legal uncertainties in the crypto industry. But the truth is, even the best regulations in the world can’t stop companies from getting to court. And there will always be business disputes that deny simple resolution.

Despite having strict protections in place for retail customers, Singapore’s crypto industry is still plagued with legal dilemmas. Given the interconnected and borderless nature of so many crypto-focused businesses, cases like the liquidation of Three Arrows could prove watershed.

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