The expansive growth of the virtual assets industry is primarily due to the fact that they have become ubiquitous over the last few years, prompting more national and regional authorities to grapple with their regulation. With the inauguration of the Fintech Roadmap Implementation Committee in Nigeria, one of the recommended areas of implementation is to decide on the preferred classification of crypto-currencies (either as Commodities, Securities or Currency). Categorisation of these assets has been a hot topic in order to determine the legal status and how the law would apply to them in different circumstances.
At present, the judicial view on the legal nature of cryptocurrency varies among jurisdictions. Some jurisdictions, including Singapore, have held that virtual assets have the characteristics of property. Other courts, including the European Court of Justice (ECJ) and courts in the United States, have held that cryptocurrency is a currency. Virtual assets or cryptocurrencies are similar in that they are primarily based on the same type of decentralized technology known as blockchain with inherent encryption.
In what was termed a watershed moment for English law in November 2019, the Chancellor of the UK High Court launched the "Legal Statement of Crypto Assets and Smart Contracts". The statement provides direction and clarity to the status of crypto assets and smart contracts under UK Law.
In the case of AA v Persons Unknown, Re Bitcoin  EWHC 3556 (Comm), the UK High Court held that bitcoin can be 'property' and can therefore be the subject of a proprietary injunction. In reaching its conclusion, the court adopted the detailed analysis of the issue set out in the UK Jurisdictional Task Force's Legal Statement on Crypto-Assets and Smart Contracts, thereby providing a far more detailed judicial basis for the finding than found in previous cases. The judge found the analysis on property to be compelling and adopted its conclusions.
The analysis identifies that under English law, property traditionally falls into two distinct categories:
- 'things in possession' (ie, tangible assets); and
- 'things in action' (eg, debt or contractual rights).
The latter category is hard to define, but it is generally used to mean a right of property that can be enforced by court litigation, or action, such as a debt or contractual right; it is debatable whether a crypto-asset should be regarded as a thing in action but, by definition, it arguably should not (it is plainly not a thing in possession as such assets are not tangible).
However, following a detailed analysis of the relevant case law, the "Legal Statement" considered that other categories in addition to things in action and things in possession are capable of being property. Property could potentially extend to novel kinds of intangible asset that are not things in action, such as crypto-assets. Accordingly, the judge proceeded on the basis that bitcoin is property and granted the injunction sought.1
More recently also, the Singaporean court had to wound up a company (Otonomos BCC Pte Ltd) who was a leader in the field of blockchain technology, which provided a legally compliant corporate governance platform powered by smart contracts and used blockchain technology to enable the automation of companies' corporate governance.
The liquidators and the court dealt with numerous issues, including realising the cryptocurrencies and other assets owned by Otonomos and fluctuations in the cryptocurrency's value.
In wounding up the company, the court had to look at the legal nature of cryptocurrency and whether they could be regarded as property.
The court considered the suit between the National Provincial Bank v Ainsworth which sets out the classic definition of 'property' as follows:
[I]t must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.
In B2C2 v Quoine Pte Ltd, the Singapore International Commercial Court recently held that cryptocurrencies met all of these requirements and accepted that cryptocurrencies could constitute trust property.
In that case, Claimant had sought the remedy of specific performance such that the Defendant should deliver up the number of bitcoin which it had wrongfully held onto from the cancellation of certain trades. The court did not grant specific performance, but rather ordered that the Claimant's remedy lay only in damages.2
In declining to grant specific performance, the Court's primary considerations were whether the person against whom the relief was being sought would suffer substantial hardship and whether damages would have been an adequate remedy. The court found that the Defendant would suffer substantial hardship if required to deliver up the bitcoin. The Claimant were market leaders and would not have held on to the bitcoin as investments. In fact, their software had immediately began hedging proceeds by selling bitcoin, whereas specific performance would have required the Defendant to deliver up bitcoin which at the time of trial had a price substantially higher than in April 2017 when the breaches occurred. The court rejected Claimant's argument that the damages were difficult to assess because of the volatility of the price of cryptocurrencies and were therefore not an adequate remedy. Instead, it held that "courts are accustomed to assess damages in relation to volatile assets and cryptocurrencies will be no different".3
As the jurisprudence of virtual assets law evolve, and more judicial authorities emerge, there is bound to be more clarity, and perhaps dynamism in regulation. Though we are yet to see instances of caselaws in Nigeria, proactive actions from regulators and stakeholders would assist the courts to properly adjudicate such matters where they arise, as seen in UK.
2 B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 03 at .
3 Id at .
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