Singapore's High Court has potentially departed from the UK Law Commission's approach to classifying crypto as a new kind of property, with a decision handed down recently.
In the case, ByBit Fintech Limited (ByBit) sued an employee of WeChain Fintech Pte Ltd, a Singaporean company that provided payroll services to ByBit alleging that the employee had abused her position to wrongfully transfer fiat currency and Tether (USDT) to her own bank accounts and wallets. She has denied the allegations but an important preliminary issue for the court to decide was whether she held the transferred money and crypto on trust for ByBit and the court needed to consider whether USDT was property capable of being held on trust.
The high court of Singapore ruled yes, that crypto assets were property and would fall within the legal classification of being as a 'thing in action'. A 'thing in action' is legal term of art, technically known as chose in action, which refers to a thing in respect of which an individual lacks present enjoyment but for which they have a legal right to sue for recovery. Historically all property has been considered as either a 'thing in possession' / a chose in possession, or a 'thing in action'. Crypto-assets do not meet the traditional requirements to be considered a thing in possession because they are just a record on a ledger.
In making this decision, the court had regard to:
The legal history of things in action as they developed in the common law in England
And
How the law approaches other social constructs such as money
The judgment also referred to the Monetary Authority of Singapore’s recent digital assets consultation paper and highlighted that MAS's proposals suggest that digital assets could be identified and segregated at the exchange level, supporting the view that it should be ‘legally possible to hold [crypto-assets] on trust’. Unusually, the court made no reference to the recent UK Law Commission Final Report on Digital Assets or the lengthy consultation and consideration given by the UK as to the common law evolving to recognise a third category of personal property, being a 'thing, specifically a crypto-thing'.
In finding that the (allegedly) wrongly transferred USDT is property capable of being held on trust, the court declared a constructive trust over the asset in favour of ByBit. The court also emphasised that while the USDT carried with it the 'right to redeem an equivalent in United States Dollars' from Tether the argument that it resembled a 'traditionally recognised things in action', which would seem to place Tether itself as closer to chose in action under the legal definitions, the court did not consider this was a necessary feature for the decision.
Overall, it is an optimistic outcome for crypto asset holders, as it sheds light on the possibility that they may enjoy:
in principle an incorporeal right of property recognisable by the common law as a thing in action
despite the UK Law Commission's approach suggested that a third category of personal property should be confirmed by legislation to settle any doubt at common law and that crypto-assets are neither things in possession nor things in action. This adds to a prior Singaporean decision confirming an NFT is property and shows the evolving flexibility of the common law in dealing with novel technology.
The UK's position, however, is one which would be bringer greater clarity to the crypto-industry as a formal recognition of a new category of property highlights the important nuances of crypto-assets and the need to customise fit for purpose and innovation enhancing legislation, so as to avoid the risk that "same risk, same regulations" approaches which do not account for the critical nuanced differences of crypto-assets will create perverse outcomes in the courts and in the world economy as crypto-assets become more prevalent.