1. Introduction

As of 15 February 2024, the market capitalisation of digital assets was reported to be around S$2.7 trillion by the Straits Times.

With the Monetary Authority of Singapore’s (MAS) regulating digital payment token services following amendments to the Payment Services Act 2019, Singapore is addressing the associated money laundering and terrorism financing risks. Singapore is in a better position to tap into the potential in these digital payment token services and cement itself as a Fintech hub.

In the financing of cryptoasset investments, the issue of taking security over cryptoassets comes to the fore. The position of the Singapore courts towards treating cryptoassets as property facilitates such secured financings.

2. Cryptoassets as property

In 2020, the Court of Appeal in Quoine Pte Ltd v B2C2 Ltd [2020] 2 SLR 20; [2020] SGCA(I) 2 observed that “There may be much to commend the view that cryptocurrencies should be capable of assimilation into the general concepts of property. There are, however, difficult questions as to the type of property that is involved.”

Since then, the High Court in ByBit Fintech Ltd v Ho Kai Xin and others [2023] 5 SLR 1748; [2023] SGHC 199 (Bybit) noted that the MAS consultation paper “Response to Public Consultation on Proposed Regulatory Measures for Digital Payment Token Services” reflects that it is possible in practice to identify and segregate digital assets.

Order 22 of the Rules of Court 2021 defines “movable property” to include “cryptocurrency or other digital currency”, thereby rendering cryptocurrency capable of being the subject matter of an enforcement order.

The High Court concluded that a cryptoasset is in principle a thing in action at common law and enforceable in court. Cryptoassets met the common law test of property, namely that “it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.”

3. Security and enforcement: control over cryptoassets

Forms of security that can be taken over cryptoassets are charges and assignments. Of particular interest is whether control can be asserted over cryptoassets to create a fixed charge, which ranks higher than a floating charge in priority for secured creditors.

A “Private Key” is required to authorise transfers of cryptoassets. Private Keys are stored in “Wallets” which are the means of interfacing with cryptocurrency. Wallets may be offline or hosted online by a service provider, such as a cryptocurrency exchange. Hence, control over a Wallet and thereby the stored Private Keys entails control over the stored cryptocurrency and can be used to establish a fixed charge.

Regarding enforcement, the High Court in Bybit observed in passing that “the procedures for serving a notice of seizure on the persons or entities having possession or control of movable property (O 22 r 6(4)(b) of the Rules of Court 2021) or on the persons or entities which register the ownership of intangible movable property (O 22 r 6(4)(g) of the Rules of Court 2021) are logically extendable to cryptocurrency or other digital currency.”

4. Conclusion

The volatility and intangible nature of cryptoassets may be daunting to some. But with the steps taken by Singapore in regulating cryptoassets and the recognition by the Singapore courts of cryptoassets as property, fundamental concerns regarding the secured financing of cryptoassets are being addressed. The digital asset market presents an opportunity and the risks of financing can be mitigated by taking security over cryptoassets.