- J Huang and M Bacina
No Boredom (or yacht clubs) as Singapore High Court confirms NFTs are property
In a ground-breaking judgment, the Singapore High Court confirmed that NFTs have attributes of property, and the Court has jurisdiction over disputes involving NFTs where the claimant is resident in Singapore.
This dispute involves a Bored Ape NFT (pictured above), one of 10,000 NFTs in the Bored Ape Yacht Club (BAYC) collection issued by the US-based company Yuga Labs.
The facts are relatively straightforward. The claimant says they are the owner of an NFT which was used as a collateral to enter into loans with a pseudonymous defendant via an online platform. The claimant had difficulty repaying a loan and alleged that the defendant first agreed to a refinance, but then reneged, "foreclosing" on the NFT using a function on the platform, transferring it to his own wallet and then listing it for sale on an NFT marketplace.
The claimant says he was devastated to lose his precious Ape, so he sued the defendant in the High Court of Singapore claiming that he had proprietary right over the NFT and that the defendant should be ordered to return the NFT. He also sought an urgent injunction to stop his Ape from being sold.
Justice Lee from the High Court said he was "satisfied" that the High Court has jurisdiction over the dispute, saying:
While the decentralised nature of blockchains may pose difficulties when it comes to establishing jurisdiction, to my mind, there had to be a court which had the jurisdiction to hear the dispute
His Honour continued:
in the present case, based on the available facts before me, that court was the Singapore court. The primary connecting factor was the fact that the claimant was located in Singapore, and carried on his business here.
The second issue considered was whether the court has jurisdiction against a psedonymous person. The judgment confirmed that the defendant cannot hide behind their pseudonymity, and that freezing orders and legal papers can be served on someone whose actual identity is unknown.
The final and most interesting issue considered was whether NFTs give rise to proprietary rights, so that an injunction could be granted over an NFT. The Court's answer was yes. His Honour ruled that NFTs are not merely information on a blockchain, but have specific attributes of property.
In particular, Justice Lee considered that:
An NFT with its unique metadata is definable;
An NFT with its private keys would be an asset with an owner being capable of being recognised as such by third parties;
An NFT comes with a right that is capable of assumption by third parties, which in turn involves two aspects, that third parties must respect the rights of the owner in that asset (powered by blockchain technology), and that the asset must be potentially desirable (demonstrated by their active trading in the markets); and
An NFT has some degree of permanent and stability.
The judgment cited with approval the decision in AA v Persons Unknown which in turn relied upon the UK Jurisdiction Task Force Legal Statement on cryptoassets and smart contracts. The Legal Statement has been an often cited document since release in 2019 and is reportedly showing up in submissions in US cases given the slow pace of regulatory development there.
Despite recent mixed messages from the Monetary Authority of Singapore concerning crypto-assets and the slow pace of licensing in Singapore, this case shows how the common law can address novel products like crypto-assets and it will further enhance Singapore's standing as a jurisdiction with clearer positions for crypto assets, making it an even more popular international destination for crypto businesses.