Special thanks to Guang-Yi, Legal Counsel at the Ethereum Foundation, for feedback and review. All views expressed are mine.
Introduction
This is an interesting question for all (potential and actual) cryptocurrency owners. (Fun fact: the rate of cryptocurrency ownership in Singapore was 19% in 2022, slightly higher than the global average of 15%).[1] Whether cryptocurrency should be considered a form of personal property is important as it affects the remedies that a cryptocurrency owner is entitled to — and the legal risks that potential investors should consider before dabbling in cryptocurrency trading. For example, if cryptocurrency does not constitute personal property, they cannot be part of an insolvency estate subject to distribution to creditors; in divorce proceedings, they cannot constitute matrimonial assets subject to distribution to the former spouses, and trusts cannot be created over them.
The short answer is yes: if you go to court in Singapore, cryptocurrency can be classified as a form of personal property. Most recently, the High Court in ByBit Fintech Limited v Ho Kai Xin & Ors [2] ruled that cryptoassets were choses in action, one of two existing categories of personal property, and were capable of being enforced in court. Some may say this decision was long-coming: most researchers already agreed that the decision in CLM v CLN[3] (HC) has aligned Singapore’s decision with that of the UK’s in National Provincial Bank Ltd v Ainsworth [4] — that cryptocurrency constitutes personal property as it is definable, identifiable by third parties, capable in its nature of assumption by third parties, and has some degree of permanence or stability (“Ainsworth Criteria”).
This conclusion is also supported by the UK Law Commission in its Final Report,[5] albeit with different reasoning. Essentially, the UK Law Commission proposes that cryptocurrency should form a third category of personal property (separate from choses in possession and choses in action),[6] while Jeyaretnam J in ByBit reasons that the category of choses in action has and can include a diversity of incorporeal property, and that cryptocurrency “has in principle an incorporeal right of property recognisable by the common law as a thing in action and so enforceable in court”. [7]
We set out the details and consequences of these legal decisions below.
1. High Court in ByBit
In ByBit, the defendant was an employee of the plaintiff company with sole access to Excel files containing ByBit’s employee payment details. She manipulated these files, which caused ByBit to transfer 4,209,720 USDT into crypto-wallets controlled by her. ByBit sought a declaration that the defendant held both the USDT and fiat currency on trust for ByBit. The question whether crypto assets were a form of personal property arose because a trust cannot be created over crypto assets if they were not.
In addressing the argument on whether crypto assets should be classified as choses in action despite not being rights enforceable by action, Jeyaretnam J’s reasoning mirrors that of Justice Lee in Janesh v Unknown Person in the latter’s analysis of the position supporting the inclusion.[8] Both judges find authority in Holdsworth,[9] which highlights that the term “chose in action”, though initially encompassing all rights which were enforceable by action, was later expanded to cover “documents such as bonds, which evidenced or proved the existence of such rights of action”. This later led to the inclusion to other incorporeal rights of property, such as bills of lading and policies of insurance.
As such, given the “diversity of incorporeal property that has been classed as things in action”, crypto assets constituted a chose in action and thus personal property, thereby fulfilling the dictum in Colonial Bank that only choses in action or choses in possession are recognised as property. [10]
In reaching this conclusion, Jeyaretnam J also relied on a consultation paper by the Monetary Authority of Singapore (MAS), [11] which he believes supports the view that it is legally possible to hold digital assets. He also referred to the Order 22 of the Rules of Court 2021, which includes “cryptocurrency or other digital currency” in the definition of “movable property”, and thus expressly cryptocurrency as a form of property capable of being the subject matter of an enforcement order.
2. What are the legal challenges to this position?
Despite the ByBit decision, the position may not be as clear-cut as it seems. There are still a few lingering questions surrounding its reasoning, namely:
- Can cryptocurrency truly constitute a chose in action in circumstances where it clearly does not embody a right enforceable by action — the very definition of a chose in action?
- Must cryptocurrency even fall within one of the Colonial Bank v Whinney categories of personal property i.e. choses in action or choses in possession?[12]
3. Can cryptocurrency truly constitute a chose in action in circumstances where it clearly does not embody a right enforceable by action — the very definition of a chose in action?
#View 1: No, it does not
The High Court in Janesh v Unknown Person[13] noted that this problem was canvassed by the English High Court in AA v Persons Unknown who demanded bitcoin on 10th and 11th October 2019. (“AA”). [14]
The answer from the English High Court is no; cryptocurrencies such as Bitcoin do not constitute either choses in possession or choses in action :
“[Bitcoin and other crypto currencies] are not choses in possession because they are virtual, they are not tangible, they cannot be possessed. They are not choses in action because they do not embody any right capable of being enforced by action”.[15]
A pictorial diagram of this statement is as such.
Figure 1 — Traditional position: Where choses in action only refer to rights capable of being enforced by action. [16]
#View 2: Yes, it does
Those in support of cryptocurrency may be comforted by the English High Court’s approval of the reasoning by the UK Jurisdictional Task Force’s legal statement on cryptocurrency and smart contracts (“The Legal Statement”),[17] which supports the view that parties do not need to apply Colonial Bank. The Legal Statement made the following important points:
- It is unclear if Lord Fry in Colonial Bank intended that an intangible thing would not constitute property if it is not a thing in action;
Figure 2 — Legal Statement: A logical corollary that Lord Fry did not intend?[18]
- His statement should not be regarded as part of the reasoning leading to his decision and so binding on other cases. The question before him was whether shares in particular things in action for the purposes of the Bankruptcy Act were, and not whether they were property; and
- On appeal, Lord Fry’s judgment was upheld on the basis that the class of things in action could be extended to all intangible property (in other words, that things in action are a residual class of all things not in possession), rather than on the basis that the class of intangible property should be restricted to rights that could be claimed or enforced by action.[19]
The Court in AA thus accepted that cryptocurrency constitutes property as they fulfil the Ainsworth criteria and cited B2C2 v Quoine[20] for support. [21]
It should be noted that High Court in ByBit did not address these arguments made in AA and by the UK Jurisdictional Taskforce.
Figure 3 — The High Court in ByBit: Crypto currency constitutes a chose in action.[22]
For starters, legal practitioners in Singapore are likely to point out that the Legal Statement has no legal effect and has not been considered by the Court of Appeal in Singapore.
One might be more alarmed that Lee Sieu Kin J in Janesh v Unknown Person appears to affirm the proposition that the criteria in Colonial Bank can be applied “if choses in action and intangible things are co-extensive”. [23] He helpfully outlines Professor Kelvin Low’s disagreement with the UK Legal Statement in “Bitcoins as Property: Welcome Clarity?” (2020) 136 Law Quarterly Review.
Recall the third point that the UK Legal Statement made above:
“Lord Fry’s judgment was upheld on the basis that the class of things in action could be extended to all intangible property (in other words, that things in action are a residual class of all things not in possession), rather than on the basis that the class of intangible property should be restricted to rights that could be claimed or enforced by action.”[24]
As explained by Justice Lee and Professor Kelvin Low, the problem is basically this:
● If A = class of things in action could be extended to all intangible property; and
● B = Intangible property should be restricted to rights that could be claimed or enforced by action,
● Then A = B, which makes no sense.[25]
Here, a diagram may be apt.
Figure 4: Legend. [26]
Grey represents rights that can be enforced in action; white represents choses in action; and the dotted circle represents intangible things.
If choses only refer to rights capable of being enforced by action
Figure 5: If choses only refer to rights capable of being enforced by action.[27]
In the scenario where choses in action only refer to rights capable of being enforced in action, the grey and the white will always overlap (as represented by the grey lines filling the white circle). As such, even if ‘choses of action’ can be extended to intangible property, this has the same effect as statement B — in both A and B, all three categories (choses of action, rights that can be enforced in action, and intangible things) overlap.
If choses refer to more than rights capable of being enforced by action
Both Justice Lee and Professor Kelvin Low allude to the proposition that choses in action can extend beyond rights that can be enforced in action and that this must be the case to prevent the effect as stated above. [28]
Figure 6: If choses refer to more than rights capable of being enforced by action.[29]
In this diagram, the white portion representing chose of action is larger than the grey representing rights capable of being enforced by action. When we apply the Legal Statement’s statement that the class of chose of action can be extended to intangible things, this results in choses of action being co-extensive with intangible things, which is different from saying that intangible things are limited to rights that can be enforced in action (which is also narrower than choses of action).
- Must cryptocurrency even fall within one of the Colonial Bank v Whinney categories of personal property i.e. choses in action or choses in possession?
The answer from UK Law Commission would be no. Their suggestion to recognise a third category reflects a recognition of cryptoassets as personal property and a reluctance to extend the definition of choses in action:
“… some digital assets are neither things in possession nor things in action but are nonetheless capable of being things to which personal property rights can relate and that this is the existing position at law.”[30]
The next question is then whether legislation or common law would be better placed to effect that position. The UK Law Commission suggests that legislation should confirm the common law position (that digital assets are neither things in possession nor things in action but are capable of being things to which personal property rights can relate), but that common law is the better vehicle to determine what falls within the third category as specifying these matters in statute may lead to an under-inclusion or over-inclusion of assets and reduce certainty in the law.
Differing views to this position exist — as pointed out by Adel Zaid Hamzah in “Recognising Cryptocurrencies as Property? — CLM v CLN”,[31] the legislature is more well-equipped with resources and may be better able to come out with a comprehensive system that regulates and protects crypto-owners. Furthermore, as demonstrated above, there are still substantive issues of situating cryptocurrencies within traditional common law property principles. Thus, it may be apt for the legislature to provide some guidance.
Conclusion
Even though the High Court in ByBit seems to have given us a definitive answer to whether cryptocurrency constitutes personal property, lingering questions remain over Jeyaretnam J’s reasoning and the relevant questions the Court did not address. The question whether cryptocurrencies constitute personal property has profound downstream consequences that many may not be aware of. For example, if they do not constitute personal property, they cannot be part of an insolvency estate subject to distribution to creditors, they cannot constitute matrimonial assets subject to distribution to the former spouses in divorce proceedings, trusts cannot be created over them, and they cannot be willed to others. These significant consequences require Courts and lawmakers around the world to carefully consider the question whether cryptocurrencies can and should be considered a form of personal property.
[1] Statista, “Ownership of cryptocurrencies in Singapore as of November 2022”, by coin (1 March 2023) <https://www.statista.com/statistics/1294071/singapore-cryptocurrency-ownership-by-coin/> (accessed 1 May 2023)
[2] ByBit Fintech Limited v Ho Kai Xin & Others [2023] SGHC 199 (“ByBit Fintech”) at [4].
[3] CLM v CLN [2022] SGHC 46 (“CLM v CLN”).
[4] National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1248.
[5] UK Law Commission, Digital Assets: Final Report (Law Com No 412, 2023) (“Digital Assets”).
[6] Digital Assets, supra n 5, p 43.
[7] ByBit Fintech, supra n 2, at [36].
[8] Janesh s/o Rajkumar v Unknown Person (“CHEFPIERRE”) [2022] SGHC 264 (“Janesh v Unknown Person”) at [68].
[9] W.S. Holdsworth, “The History of the Treatment of ‘Choses’ in Action by the Common Law” (1920) 33(8) Harvard Law Review 997. See Janesh v Unknown Person, supra n 8, at [64] and ByBit Fintech, supra n 2, at [34].
[10] Colonial Bank v Whinney 30 Ch.D. (“Colonial Bank”) at 286.
[11] Monetary Authority of Singapore, “Response to Public Consultation on Proposed Regulatory Measures for Digital Payment Token Services”, <https://www.mas.gov.sg/publications/consultations/2022/consultation-paper-on-proposed-regulatory-measures-for-digital-payment-token-services> (accessed 6 August 2023).
[12] Colonial Bank, supra n 10.
[13] Janesh v Unknown Person, supra n 8, at [60].
[14] AA v Persons Unknown who demanded bitcoin on 10th and 11th October 2019 and ors [2019] EWHC3556 (Comm) (“AA”) at [60].
[15] AA, supra n 15, at [55].
[16] Diagram by author.
[17] UK Jurisdiction Taskforce, Legal Statement on Cryptoassets and Smart Contracts, <https://www.blockchain4europe.eu/wp-content/uploads/2021/05/6.6056_JO_Cryptocurrencies_Statement_FINAL_WEB_111119-1.pdf> (accessed 6 August 2023) (“The Legal Statement”).
[18] Diagram by author.
[19] The Legal Statement, supra n 17, at [74] — [77].
[20] B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 03.
[21] The Legal Statement, supra n 12, at [58].
[22] Diagram by author.
[23] Janesh v Unknown Person, supra n 8, at [67].
[24] The Legal Statement, supra n 17, at [76].
[25] Janesh v Unknown Person, supra n 8, at [65] — [66].
[26] Diagram by author.
[27] Diagram by author.
[28] Janesh v Unknown Person, supra n 8, at [67].
[29] Diagram by author.
[30] Digital Assets, supra n 5, p 34.
[31] Adel Zaid Hamzah, “Recognising Cryptocurrencies as Property? — CLM v CLN” Singapore Journal of Legal Studies [2022] at p 477.
