Cryptocurrency as Property: A New Reference Point for Judicial Practice

The Russian legal system has developed an important approach to the classification of cryptocurrency: property rights associated with its legal ownership and use are subject to judicial protection. This effectively recognizes cryptocurrency as an object of property rights and significantly changes the logic for resolving disputes related to digital assets.

Until now, judicial practice in this area has been fragmented and inconsistent. In some cases, digital assets were considered property, in others, an object outside the scope of civil law, and sometimes cryptocurrency transactions were even classified as economically risky transactions not deserving legal protection. The new approach eliminates this uncertainty and creates more consistent guidelines for the courts.

The position was prompted by a dispute over the transfer of a digital asset to a third party for management. The asset was not returned within the specified timeframe, and the owner filed a lawsuit to protect his property rights. However, the lower courts rejected the claim, citing the failure to notify government agencies of the ownership of the digital currency and the transactions with it.

In effect, the courts adopted a formalistic approach: regulatory gaps and the lack of special procedures were considered grounds for denying judicial protection. This placed digital asset owners at a disadvantage compared to owners of other assets.

The approach of the highest court

During the retrial, a fundamentally different approach was formulated. The court stated that property rights arising from the legal ownership of digital currency cannot be arbitrarily excluded from judicial protection. Despite their digital form, such assets possess economic value and participate in civil transactions, and therefore require legal protection.

Particular attention was paid to the fact that the failure to comply with formal requirements—in the absence of a clearly established enforcement mechanism—should not entail negative consequences for bona fide participants in the marketplace. State regulatory gaps cannot be passed on to private entities.

As a result, the conclusion was reached: until the necessary changes to the regulation are made, courts are obliged to consider disputes over digital currency on the merits, assessing evidence of its legal acquisition and use, rather than denying protection on formal grounds.

Significance for judicial practice

The resulting position is systemic and extends far beyond a single dispute. It sets a new standard for adjudicating cases involving digital assets and reduces the risk of arbitrary decisions.

The key implications for practice can be summarized as follows:

• cryptocurrency is recognized as an object of property rights subject to protection;
• refusal to consider a dispute on formal grounds becomes unacceptable;
• priority is given to the analysis of the factual circumstances and the good faith of the parties;
• This opens up the possibility of revising previously made decisions based solely on regulatory gaps.
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For businesses and private investors, this means increased legal certainty and predictability of legal outcomes.

Questions that remain open

Despite the significance of the proposed approach, a number of aspects still require further consideration. In particular, uncertainty remains regarding the classification of certain types of digital assets, particularly stablecoins. In the dispute under consideration, digital currency and stablecoins were not effectively distinguished, although their economic and legal natures may differ significantly.

The lack of clear differentiation leaves open questions about the tax implications, accounting procedures, and the specifics of the circulation of such assets. Clearly, further development of practice and adjustments to legislation will be necessary to establish more detailed regulations.

The recognition of cryptocurrency as an object of property rights and the abandonment of a formal approach to protecting such rights marked an important step in the development of digital law in Russia. Judicial practice has received a benchmark that promotes the stability of civil transactions and the protection of bona fide market participants. In the future, this decision could become the basis for developing uniform standards for regulating digital assets and mitigating legal risks for both individuals and businesses using cryptocurrency in their economic activities.