July 2023
CRYPTO ASSETS CLASSIFIED AS A CHOSE IN ACTION, A FORM OF PROPERTY AND CAPABLE OF BEING THE SUBJECT MATTER OF LEGAL ENFORCEMENT BY COURTS
The question whether crypto assets should be classified as property has been conclusively answered by the Singapore High Court decision in ByBit Fintech Ltd v Ho Kai Xin and others [2023] SGHC 199. Until this decision, the courts in Singapore had considered the question on a level which only required them to find that it was seriously arguable that crypto assets are property.
Facts
ByBit employed Ms Ho to process its employees’ payroll. In the course of Ms Ho’s employment, she substituted some employees account details with her own and caused fiat and crypto asset payments to be made by ByBit to her. ByBit claimed Ms Ho breached her employment contract and abused her position to wrongfully transfer fiat and crypto assets to herself.
The reliefs sought by ByBit included a declaration that Ms Ho holds the fiat and crypto assets on trust, an order for their return or for their traceable proceeds to be return. As ByBit applied for summary judgment against Ms Ho, the court had to determine inter alia, whether the crypto assets are a chose in action, a form of property capable of being held on trust.
Decision
ByBit succeeded in its summary judgment application and significantly, the court granted the declaration that Ms Ho held the crypto assets on trust. In doing so, the court concluded that the holder of a crypto asset has a right of ownership recognisable by the common law as a chose in action.
This decision settled the lingering uncertainty as to whether crypto assets should be classified as property, and if so, what kind. Earlier cases faced with the same question had been in relation to interim reliefs and thus did not need to go this far since the question had always only needed to be addressed on the basis whether it was a serious question to be tried or whether there could be a good arguable case that crypto assets are property.
In coming to this decision, the court gave the following key reasons:
- Crypto assets have gained recognition for their transferable value and are even reflected on the balance sheets of companies.
- The Monetary Authority of Singapore has proposed amendments to implement segregation and custody requirements for digital payment tokens, acknowledging the possibility of identifying and segregating digital assets.
- In the Singapore Rules of Court 2021, “cryptocurrency or other digital currency” is explicitly recognized as a form of movable property capable of being the subject matter of an enforcement order.
- Even though crypto assets are not physical assets in the traditional sense, they can be defined and identified by humans, allowing them to be traded and valued as holdings.
Effect and significance
This landmark decision makes clear that remedies such as proprietary injunctions, tracing, declaration of trusts, are available a claim for crypto assets.
This will guide claimants in future on the remedies to seek and how to plan their cases where claims for crypto assets are involved.
If you have any queries on how these developments may affect your business or would like to obtain advice, please do not hesitate to get in touch with us.