No country as of yet has managed to find a way to control and understand cryptocurrency fully. While they might put legislation in place to make it safer, governments are regularly coming across gray areas and new problems. While this is common with any new technology, cryptocurrency’s ever-expanding following is making it all the more tricky, as a government, to deal with ongoing problems.
Russia discovered this recently in a case of bankruptcy by Russian citizen Ilya Tsarkov. Ilya filed for bankruptcy in October last year, with the case heard in February. As he had mentioned to a bankruptcy trustee that he had a cryptocurrency wallet, it was requested that this wallet’s contents be transferred to the bankruptcy estate.
However, this is where a gray area arose. As the Russian Federation didn’t recognize cryptocurrency as property, it wasn’t seen as a valid payment option to his creditors. Russia didn’t, at the time, have a precise definition of what cryptocurrency was – whether it was property, income, or information, so there was no way of knowing if it was going to be a legal payment option.
After an appeal in the Russian arbitration court of appeals, the ruling was overturned, and Ilya was ordered to hand over his private cryptocurrency key to the bankruptcy trustee, which would transfer ownership of Ilya’s 0.2 Bitcoin. At its current value, it equates to a little under 2,000 US dollars.
To come to their decision, the court cited similar cases in the European Court of Human Rights regarding bankruptcy in Japan. In that case, it was deemed agreeable to sell the cryptocurrency as property due to the reality of advancing technology. If they couldn’t sell cryptocurrency, it was all too easy for those declaring bankruptcy to turn all of their assets into digital currency, protecting their fortune and avoiding having to pay their creditors.
Russia isn’t the first country to declare cryptocurrency as property, and they certainly won’t be the last. As more governments discover loopholes, it’s only a matter of time before most countries adopt the same attitude.