What is Conversion under Texas Law for Cryptocurrency?
Conversion under Texas Law
Cryptocurrency theft raises novel legal questions, particularly whether Texas law recognizes a claim for conversion when digital assets like Bitcoin are hacked or stolen. Under current Texas precedent, courts are unlikely to treat cryptocurrency as property subject to conversion, leaving plaintiffs to pursue alternative legal remedies.
Conversion Claims Under Texas Law Require Tangible, Traceable Property — To establish conversion in Texas, a plaintiff must show ownership or right to possession, unauthorized control by the defendant, a demand for return, refusal, and resulting injury. Texas courts have traditionally limited conversion claims to tangible property or specifically identifiable chattel, making it difficult to apply the doctrine to digital assets that lack physical form or unique traceability.
Texas Courts Do Not Recognize Conversion of Money Once Identity Is Lost — Texas law allows conversion of money only when it is a specific, identifiable sum held for safekeeping without transfer of title. Once money is delivered and commingled, its identity is considered lost, and conversion no longer applies. Because cryptocurrency functions similarly to bank deposits and digital funds that cannot be specifically traced after transfer, Texas courts would likely reject conversion claims for stolen cryptocurrency.
Cryptocurrency Theft Is Better Addressed Through Alternative Legal Theories — Although Texas regulators have taken steps to oversee cryptocurrency activity through securities enforcement actions, there is no targeted Texas statute or case law recognizing conversion of cryptocurrency. As a result, digital currency theft is still treated more like unauthorized access to a bank account than theft of physical property, making conversion an unavailable cause of action. Plaintiffs affected by cryptocurrency hacks should instead rely on other statutory or common-law claims to seek recovery.
For more information, see our blog post Cryptocurrency Hack - Conversion under Texas Law?
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This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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