On 29 May last, the Court of Cassation issued judgment no. 20138, in which it held that the offence of embezzlement is constituted by the conduct consisting in the permanent misappropriation of the crypto-asset Bitcoin.
What is a crypto-asset?
The European Regulation on crypto-assets of 31 May 2023, No. 2023/1114/EU, defines a crypto-asset as a digital representation of a value or a right that may be transferred and stored electronically by means of distributed ledger technology or a similar technology.
Legislative Decree No. 231 of 21 November 2007 on anti-money-laundering adopts the same definition.
Bitcoin, being the first and most well-known crypto-asset, is therefore a digital representation of a value or a right, and as such it consists of electronic data.
The facts of the case
The injured party had transferred possession of the digital data relating to his Bitcoin to the defendant’s electronic wallet (e-wallet). The defendant, who had been entrusted with investing it in a subsequent economic transaction, failed to do so and, despite repeated requests, never returned it. The value of the cryptocurrency at the time of the defendant’s failure to return it was established at EUR 7,500.00 on the basis of market quotations.
The appeal before the Court of Cassation
The trader, who had been convicted by both the Trial Court and the Court of Appeal, lodged an appeal before the Court of Cassation, alleging, inter alia, a violation of the statutory elements of the offence of embezzlement. He argued that the offence of embezzlement requires the taking of a movable property and, in the case of digital data, the physical appropriation of the data and/or of the digital value; whereas, in the present case, only a virtual transaction had occurred, without any subtraction or retention of digital files, since no material transfer of files from the injured party to the financial intermediary had taken place.
The appellant denied that Bitcoin constitutes a movable good or a digital file, asserting that it is merely a cryptocurrency, and therefore a value, and that no person had delivered or transferred files; instead, there had only been a transfer of such value into an e-wallet, an activity which entails solely a credit/debit relationship between the parties and, consequently, does not amount to any criminal offence.
The principle of law
The Court of Cassation clarified that Bitcoin may be classified as movable property for the purposes of criminal law, insofar as it consists of digital data.
In particular, the Court specified that digital data—by virtue of their structural physicality, the ability to measure their dimensions, and their transferability from one place to another—qualify as movable property under criminal law, and it emphasized that Bitcoin is indeed composed of such digital data.
The conclusion of the case
The Supreme Court dismissed the appeal, holding that the offence of embezzlement had been made out, since possession of the digital data relating to the Bitcoin had never been returned despite the investor’s repeated requests following the failure to carry out the intended transaction.
Indeed, the injured party had transferred the digital data relating to his Bitcoin into the trader’s electronic wallet on the understanding that the latter would invest the Bitcoin in a transaction, in return for a 5% share of the expected profit. By doing so, the injured party transferred not ownership but merely possession of the Bitcoin, having delivered the same digital data with the specific mandate to invest the Bitcoin.
Given that, due to the nature of Bitcoin transfers, such transfer could not be revoked by the investor, the trader’s failure to return the Bitcoin constituted the unlawful appropriation of the movable property consisting of the digital data relating to the Bitcoin and, consequently, of the Bitcoin itself.
The law firm Dal Pozzo in Milan provides legal assistance to private individuals, public entities, and businesses, including matters related to crimes against the economy and property.