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Over the past ten years, cryptocurrencies have grown from the interest of a few internet enthusiasts to a globally recognized means of exchange valued in the billions of dollars. But while Bitcoin, Ethereum, and Dogecoin have become household names, the legal framework surrounding cryptocurrency remains unclear and uncertain. In this article, we will outline some of the latest developments in Canadian law regarding the legal treatment of cryptocurrencies.
Background
In general terms, crypto currency a type of digital asset or ‘token’ that operates on a blockchain. Block is a distributed ledger technology, meaning that every time a transaction occurs on a blockchain system, each part of that system independently checks the status of each part. Blockchain and cryptocurrency are set to be revolutionary in part because it enables decentralized, ‘trustless’ transactions, without the need for central intermediaries.
One of the legal questions that comes up around cryptocurrency is how to classify it legally – what is cryptocurrency? Is it a form of money? Security? Is it rich? Is it a brand new or new item with all its features? These distinctions are far from academic; how cryptocurrencies are classified can have a big impact on how they are treated by legislators, courts and regulators.
Canadian courts have been forced to question how to treat cryptocurrency when considering whether to provide legal remedies and relief, as in many cases in the past.
Cryptocurrency as a wallet
Inside Lee v. Barber2022 ONSC 1176 (Barber), the Ontario Court of Appeal granted Mareva’s order to freeze the funds raised by the ‘Freedom Convoy’ operators. Mareva’s injunction is an excellent remedy granted when the defendants’ allegations against the defendant are very strong, the defendants have property within the court’s jurisdiction, and there is a high risk that it will be taken or scattered by the defendants. especially before the court’s decision.
The property sought to be frozen by the plaintiffs therein
Barber cryptocurrency consists of digital wallets. It raised the question of whether cryptocurrency stored in digital wallets is still being held by suspects, and whether digital assets on the blockchain are considered within the court’s jurisdiction.
The court found that the money, “whether in the form of cash or cryptocurrency is legally in the power, authority and power of the accused.” It was also found that the organizers and many digital institutions that hold their cryptocurrency are in the jurisdiction of the court. It was pointed out that common fiat money like Canadian dollars, deposited in the bank, “exists[s] not as a bundle of money in a box or a box, but as a ledger that records the financial institution’s debt to the customer… In that sense, we are already in the age of digital currency.” Digital wallets are non-stop and can be used to pay off a larger debt than a bank account if an individual or business can access the funds. by court order.”
Cryptocurrency as a digital asset
Inside Shair.com Global Digital Services Ltd v Arnold, 2018 BCSC 1512, the Supreme Court of British Columbia considered an application for a Mareva injunction and protection order related to cryptocurrency. In this case, the defendant, a former employee of the plaintiff, sold the cryptocurrency with the money received by the plaintiff, but did not return a laptop with the necessary financial information. after the termination of the petitioner’s employment.
The Court held that digital currency (that iscryptocurrency) and financial information related to the matter as “digital assets” and ordered to be preserved pending litigation.
Cryptocurrency like a species of wealth
Inside Cicada 137 LLC v. Medjedovic2022 ONSC 369, and Cicada 137 LLC v. Medjedovic, 2021 ONSC 8581, Medjedovic, a math genius, was accused of stealing $15 million worth of cryptocurrency using hacking techniques. He avoided prosecution and refused to cooperate with authorities. The petitioner made a wrong request Anton Piller order, is a form of injunctive relief that enables search and seizure in civil cases. As part of that order, the assets will be seized and then managed by a third party until the case is resolved. In this case, the cryptocurrency is transferred from the carrier’s digital wallet to the account of a private custodian.
The Ontario court was careful not to reach final conclusions about the proper nature of cryptocurrency as property. However, it is said that it is sufficient for now “to find the people who have invested in obtaining control of the signs” claimed by the defendant. In addition, the court stated that “the law will determine in due course whether digital signs are a species your possessions…”
The court emphasized the importance of expanding the scope of assistance in the area of cryptocurrency: “This is a very important reason why the Anton Piller order is necessary… As this new trend grows of investment and trade, is very important. to the stability of the economy and the online market to maintain the integrity of these assets. Investments and public works require the authority of the laws to protect their rights. Despite what some people think, the law applies to the internet. It affects all relationships between people, governments, and others.”
Cryptocurrency as a family gift
Inside MW v NLMW, 2021 BCSC 1273, the Supreme Court of British Columbia dealt with cryptocurrency in the context of family property division after marital separation. Under the Family Law Law, SBC 2011, c 25, “proper family” defined in s. 84(1)(a) real and personal property owned or beneficially owned by the spouses at the date of separation, if property is separated. The Supreme Court of British Columbia did not perform the same analysis as cryptocurrency in the definition of “property” – the Court only included the cryptocurrency of the respondent when distributing assets and liability of the parties and said value to the respondent’s cryptocurrency. hold, fully agree that cryptocurrency met the definition of family property.
Other cases across the country are ready to include cryptocurrency as family property to be included in the family property division (e.g. Kostrinsky v Nasri, 2022 ONSC 2926). Inside MMD v JAH2019 ONSC 2208, when considering ordering the disclosure of cryptocurrency accounts in a family law matter, the Superior Court of Justice of Ontario stated that “cryptocurrency” is a simple and basic , an inexhaustible source of wealth that affects the courts. more to come.”
Cryptocurrency as something to decide another day
Inside Nelson v Gokturk, 2021 BCSC 813, the plaintiff brought claims for breach of contract and conversion related to the sale and delivery of 50 Bitcoin to the holder. The plaintiff sent 50 Bitcoin to the defendant, but the defendant did not pay the agreed amount. The Supreme Court of British Columbia held that the defendant was in breach of contract and ordered the defendant to pay the plaintiff the amount agreed in the contract.
As for the claim in conversion, the Court said, without deciding, that the plaintiff can establish the tort of conversion for Bitcoin. Although the Court said that cryptocurrency is a “digital asset”, nothing in the decision turns on this category. In its analysis, the Court concluded that damages are the same whether awarded in contract (breach of contract) or tort (transaction), and therefore, held that there was no reason to reconsidering the validity of the conversion claim. As a result, no decision was made regarding the nature of the cryptocurrency in relation to the conversion claim.
Inside Kik Interactive v AIG, 2020 ONSC 8194, the applicant sought reimbursement from its insurer for legal expenses incurred in defending an action initiated by the Securities Exchange Commission in the United States alleging that the cryptocurrency offered by the applicant is safe and sold to the public. an unregistered public offering. The applicant said that his cryptocurrency is not a security but an asset. The Ontario Court of Appeal ruled that the alleged public offering of securities was sufficient to trigger an exclusion in the policy. As such, the issue did not turn on the fact that cryptocurrency was a security, that was all that was claimed, and the Court did not make a finding on the nature of cryptocurrency.
Takeaways
While major cryptocurrency-related lawsuits are rare in Canada, the rise of crypto-assets and their integration into the broader financial system suggests that litigation related to these questions will increase. Applying legal principles to cryptocurrency presents unique challenges, but Canadian courts demonstrate the flexibility and adaptability of common law. The cases discussed in this article suggest that the courts have yet to make a clear decision on the legal status of cryptocurrency. However, the courts have only come to the point of separating the work to define a major purpose for cryptocurrency, and taking steps to provide relief for digital assets.
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The content of this article is intended to provide a general guide to the topic. Seek expert advice for your specific circumstances.
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