In a recent defamation case before the New South Wales district court, the judge allowed cryptocurrency to be used as collateral.
While Judge Judith Gibson acknowledged the volatility of crypto, she noted that it is a recognised form of investment.
The accusing party in the defamation case was required by the court to deposit $20,000 AUD in a court-guarded bank account. In the event that the accusing party loses or secedes the case, the deposit would act as a form of payment towards a portion of the defendant’s legal fees.
The judge allowed the accuser to use cryptocurrency for this deposit. Since it is not possible for cryptocurrency to be deposited in a bank account, the court instructed the accusing party to deposit it in a cryptocurrency exchange account.
As the defendant’s legal team has voiced concerns about the instability of crypto, the accuser agreed to deliver monthly reports on the value of the cryptocurrency in the account. The accuser is also required by the court to inform the defendant’s legal team if the value of the account drops below $20,000 AUD.
“I can see the desirability of the defendant receiving prompt notification of any drop in the value of the account,” said Judge Gibson. “These are uncertain financial times.”
The judge allowing cryptocurrency to be used as collateral in this case further legitimises it as an investment vehicle. While government institutions have been slow to accept crypto, many experts believe that the NSW court’s decision is a sign of things to come.