What is Bitcoin? How would the law characterise Bitcoin? Is it legal property? What are the plausible private law issues relating to Bitcoin? This article offers some thoughts addressing these questions.

Sinking Your Teeth into Bitcoin


Bitcoin and its variants (eg Litecoin, Namecoin) have been in the spotlight over the past year, receiving coverage from advocates and naysayers alike but remain “sexy” enough to draw media attention. What is a Bitcoin? How would the law characterise Bitcoin? Is it legal property? What are the plausible private law issues relating to Bitcoin? This article offers some thoughts addressing these questions. 

Bitcoin is a digital currency that operates on an open-source peer-to-peer system. Its value depends wholly on what people ascribe to it (as opposed to say, gold or government fiat). While it could be a store of value, a Bitcoin has no inherent value – unlike, for instance, coffee which can be consumed, one cannot do anything with a Bitcoin except to trade it for something else. In that sense, a Bitcoin is like money. Yet, unlike money dominated in national currency which would be legal tender,1 Bitcoins may or may not be accepted for making good payment obligations. 

Bitcoin is a peer-to-peer payment system in that it does not require a third party intermediary (such as PayPal) to process transactions but instead distributes the intermediary functions across the whole network of Bitcoin users. In simple terms, it does this by distributing all the relevant information about every Bitcoin transaction across the network of users. Transactions, which are not as anonymous as they are commonly perceived to be, are verified against this virtual log. 

The supply of Bitcoins is finite (the reason for this is rather technical2) and will ultimately be limited at a total of 21 million Bitcoins (“BTC”s). Hence, its value will be subject to market forces based on supply and demand. At the start of 2013, the value of one BTC was just USD 13.50; at January 2014, it was about USD 700.3 It is unsurprising then that Bitcoin has been gaining much attention from financial investors and speculators. Some even say virtual currency is fuelled by growing distrust of the volatility of traditional currency and monetary policies. (For more information on Bitcoins, see the following endnote.4)

Perhaps for the same reason, Bitcoins have been subject to many attacks by hackers. Recently, a large Bitcoin exchange (from which one purchases Bitcoins with money), Mt Gox, was allegedly hacked and a substantial amount of its customers and its own Bitcoins (worth almost USD500 million) were stolen.5 Mt Gox has since filed for insolvency. Prior to this, several Bitcoin exchanges also suffered denial of service attacks from hackers.6

Given the above, we analyse below how Bitcoins could be legally characterised and the legal issues relating to various plausible scenarios concerning the same. 

Legal Characterisation of Bitcoins

Legal characterisation of Bitcoins is especially pertinent where private law issues concerning Bitcoins arise in civil matters. In contrast, legal characterisation is less problematic when it is regulated by way of statute or policy guidance given that the relevant authority would characterise Bitcoins to achieve specific legislative objects.7

The Inland Revenue Authority of Singapore (“IRAS”) has issued a guidance note early this year, taking the position that virtual currencies such as Bitcoins are “subject to normal income tax rules”.8 In summary, businesses that trade in goods or services using Bitcoins would have to be taxed on the open market value of the relevant goods or services in Singapore dollars. Businesses that trade in, or mine and trade in Bitcoins will be taxed on the profits derived from such trade. Businesses that purchase Bitcoins as long term investments would not be taxed given that there are no capital gains taxes in Singapore. 

Recently, the Monetary Authority of Singapore (“MAS”) announced that it would regulate virtual currency intermediaries in Singapore who trade or facilitate the exchange of virtual currencies such as Bitcoins to address potential money laundering and terrorist financing risks.9 It should be noted that the regulation does not regulate Bitcoins per se but intermediaries such as Bitcoin exchanges. Also, the MAS does not regard Bitcoins as securities for the purposes of the Securities and Futures Act (Cap 289).10

Hence, the legal characterisation of Bitcoins under private law remains uncertain. Given the intangible and dynamic nature of Bitcoins, how should Bitcoins be legally characterised? It appears that Bitcoins are what they need to be for the purpose of different regulatory controls. We suggest that Bitcoins can be analysed from different facets. 

In a sense, a Bitcoin is a dynamic string of computer code. Computer codes may be protected by the law of copyright as a type of literary work, if not a “computer program” within the meaning of s 7(1) of the Copyright Act (Cap 63).11 However, for copyright to subsist, the work has to be “original”, ie it has to be the product of a substantial amount of the author’s skill, labour, effort and judgment and cannot merely be a copy of another person’s work.12 In the case of Bitcoins, it appears that the code that is passed on to each subsequent party is merely a variant of the previous code, the difference being a segment of code that records a unique signature of the transaction. It may thus be that Bitcoins, as a computer code, would not satisfy the “originality” requirement. Further, copyright ownership vests in the author of the work.13 It is difficult to pinpoint a specific entity as the author of each Bitcoin code given that it is the self-functioning peer-to-peer Bitcoin system that causes the string of code to change with each transaction. Hence, while a Bitcoin may be a string of computer code, it may not be legally characterised as giving rise to intellectual property rights. 

Being a virtual currency, a Bitcoin is a medium of exchange of value. When a party uses Bitcoins to pay for goods or services, Bitcoin is merely the valuable consideration moving from that party for the purposes of constituting a valid contract. Thus, the relevant analysis would be contractual and the Bitcoin would be the subject matter of the contract. 

However, where Bitcoins are purchased or obtained by a party from another party, eg a Bitcoin exchange, the Bitcoins may not be stored in the purchaser’s Bitcoin wallet (which is software that may be operated on a user’s mobile phone or on the internet, etc) but left in the latter party’s own wallet. (This was how the Bitcoins of Mt Gox’s customers could have been stolen from its system.) Such a scenario is similar to that of a banker-customer relationship viz monies in bank accounts. The customer does not actually own or possess the money in his bank account but obtains a chose in action against the bank: it is a debt owed by the bank to the plaintiff – a right of action against the bank to be delivered the monies equivalent to the value stored in the customer’s bank account.14 The customer thus has a right to commence legal action to obtain that benefit. The distinction, however, has to be drawn between: (i) the initial transaction between the customer and Bitcoin exchange; and (ii) the subsequent agreement to leave or store the customer’s Bitcoins with the exchange. The former transaction, in which the customer purchases Bitcoins from the exchange, is a sale and purchase contract – the purchased Bitcoins may then be transferred to the customer’s Bitcoin wallet. Alternatively, as in the case of the latter agreement, the customer’s Bitcoins may be left or stored with the exchange, who holds the Bitcoins on behalf of that customer – in that case, the customer obtains a chose in action against the exchange. 

At the crux of the matter is the question of whether Bitcoins can be characterised at law to be property. The law recognises certain types of intangible property, eg choses in action.15 However, a Bitcoin per se does not fit neatly within the meaning of a chose in action. A chose in action has been described by the Singapore High Court to be a “personal right of property which can only be claimed or enforced by action and not by taking physical possession”.16 A Bitcoin, however, is not a right that can be enforced by action. Against whom can an owner of Bitcoin enforce his right? What rights does the owner have to enforce? Instead, all he has is something which may or may not be accepted as a thing of value. 

Unfortunately, the legal and philosophical concept of “property” is a controversial one.17 While a Bitcoin might arguably be “definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability”18 and also “excludable” (which has been suggested to be the touchstone of property19) given the solution of the Bitcoin system to resolve the “double-spending problem” without a third-party intermediary,20 the practical reality is that a thing is not “property” unless and until it is recognised at law as property. In this respect, the common law has been slow to adopt new phenomena as “property”, its piece-meal incremental approach at times giving rise to illogical and artificial distinctions (which we elaborate on further below).21 It, therefore, remains open as to whether a Bitcoin may be legally characterised as property. This issue has far-reaching practical implications, which we next look at. 

Legal Issues Relating to Plausible Scenarios

In the light of the foregoing analysis, it is worth exploring plausible legal issues pertaining to Bitcoins. We aim to raise some relevant questions and considerations relating to the same in the hope that it would serve as a launching pad for future legal thought leadership on this subject. 

Bitcoin Theft

What happens if Bitcoins have been stolen from your virtual wallet? Since Bitcoins are intangible computer codes for which there is doubt about whether intellectual property rights would arise from the same (see above), intellectual property protection is unlikely. Assuming that Bitcoins per se are not to be construed in law as “property”, property torts such as conversion and trespass would also be logically inapplicable (we proffer an alternative analysis on this further below). 

However, if you could identify the thief, it is nonetheless plausible to claim against the thief on the basis of unjust enrichment. The elements to make out unjust enrichment are well-established in Singapore jurisprudence: (i) defendant has been enriched; (ii) the enrichment was at the plaintiff’s expense; (iii) unjust factor; (iv) defendant’s lack of defence.22 In the scenario where a thief takes something of value belonging to the plaintiff, it is likely to be uncontroversial that the first two elements would be made out given the direct nexus between the plaintiff’s loss of Bitcoins, which has quantifiable monetary value, and the thief’s gain in the same.23 As regards to the third element, the relevant unjust factor would likely be a failure of consideration.24 Absent any defence from the defence, the victim of Bitcoin theft would thus likely have a claim against the thief for the value of the stolen Bitcoins. 

Related to the above analysis is the question of whether one can claim restitution of stolen Bitcoins on the basis of restitution for wrongs. It remains controversial in the law of restitution as to whether proprietary restitution is grounded in unjust enrichment or in the vindication of proprietary interests.25 If the latter approach is undertaken, proprietary restitution would be unavailable for the victim of Bitcoin theft given that Bitcoins per se are unlikely to give rise to proprietary interests. In the same vein, tracing and following would not be entitled to the victim given that both tools are predicated on a proprietary interest, whether legal or equitable. This would be unlike money where it is well-established that proprietary interest in a victim’s money would persist through the thief’s dealing of the same.26

The analysis in the preceding paragraph, however, might be different in the case where a thief steals a person’s Bitcoins that had been stored with an exchange. In such a scenario, the victim suffers a theft, not of Bitcoins, but a chose in action against the exchange for the delivery of the Bitcoins. In the landmark House of Lords decision of Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL) concerning a claim by a law firm against a casino to recover monies stolen by a partner in the plaintiff’s firm, their Lordships held that although the plaintiffs had no proprietary rights in the monies in the bank account, they were owners of the chose in action against the bank (ie the debt owed by the bank to the plaintiffs) and could trace their property in the same into its direct product – the monies withdrew by the defrauding partner – and follow the same into the hands of the casino. Their Lordships further held that given that the casino had not given valuable consideration for the gambling chips, which were exchanged with the stolen monies, the casino thus had to pay the equivalent sum of the monies (subject to the defence of change of position) to the plaintiffs. Significantly, Lord Goff explained at 573-574 that a chose in action is a species of property and since the chose in action was enforceable at common law, the chose in action was legal property belonging to the plaintiffs at common law, thereby allowing the plaintiffs to trace their property at common law in that chose in action, or in any part of it, into its product. Assuming that our analysis above is correct, ie that a customer of a Bitcoin exchange who had stored his Bitcoins with the exchange owns a chose in action against the exchange, and assuming that the chose in action is enforceable at common law, it is, therefore, plausible that tracing and following would be entitled to the victim. Certainly, this would have profound practical benefits for the victim should he wish to claim against an innocent recipient of the victim’s stolen Bitcoins or the substitute products of the same. 

The above (tentative) conclusion is, however, troubling for two reasons. First, it is peculiar that there is a distinction of significant practical consequences between: (i) a chose in action for delivery of Bitcoins, which gives rise to proprietary rights at common law; and (ii) the Bitcoins per se, which do not give rise to proprietary rights. The problem lies with the cautiousness of the common law in coming up to speed with modern developments to recognise “property” in new contexts (see above discussion on whether Bitcoin is characterised in law to be property). 

The second problem with the above analysis is that it has been held by (a bare majority of) the English House of Lords in OBG Ltd v Allan [2007] UKHL 21 that a chose in action cannot be the subject of an action in conversion. It is contradictory in principle for the law to treat a chose in action as “property” for the purposes of tracing and following, but to effectively refuse to regard a chose in action as “property” for the purposes of a property tort. Indeed, the dissenting judges, Lord Nicholls and Baroness Hale, took the view that the distinction between choses in action and choses in possession made no sense; the illogical artificiality of the distinction is especially pronounced given that the law at present already provides protection of some choses in action, ie by deeming documentary intangibles (eg cheques) embodying the chose in action as having the same value as the chose in action.27 It is significant that Baronness Hale observed at [317] that in other jurisdictions, namely the US and Australia, the question of whether intangible things such as choses in action and even computer records and data are deemed to be property capable of being subject to an action in conversion has been addressed. Indeed, Baroness Hale hinted that the relevant question in analysing whether a thing should be deemed to be capable of being subject to conversion or not should be whether it is assignable or not, and not whether “it exists in cyber-space rather than on paper”.28

Given that it remains an open question as to whether Bitcoins could be legally characterised as “property”, it is, therefore, uncertain whether the tort of conversion could apply to the case of a theft of Bitcoins per se. A victim of Bitcoin theft may then be limited to a personal claim in unjust enrichment. Yet, it would be certainly more intuitive to say that the victim of Bitcoin theft has recourse in the property tort of conversion against his thief, as he would if he had been the victim of theft of his dollar bills, than to say that the victim of Bitcoin theft has to resort to a personal claim in unjust enrichment. There are significant practical implications resulting from the analysis of whether Bitcoin is “property”, particularly in the context of insolvency, which we shall analyse below. 


If Bitcoins are not “property”, proprietary remedies would not be available for claims concerning Bitcoins. The problem of a lack of proprietary remedy becomes significant in the context of insolvency. In a hypothetical scenario where a customer of a Bitcoin exchange loses his Bitcoins stored with the latter as a result of, for instance, mistaken payment, and the recipient had since become insolvent, the customer’s personal claim against the recipient would have little practical consequences. In contrast, if the customer had a proprietary claim against the recipient, the customer would be able to claim proprietary restitution of the Bitcoin on the basis of his persistent proprietary interests. 

Likewise, if a Bitcoin is deemed at law to be “property”, the above analysis on the relationship between customer and Bitcoin exchange would be completely different. Instead of a creditor-debtor relationship between the exchange and the customer, it is plausible for the relationship to become akin to that of a customer and a bullion vault where the customer has stored his bullion with the vault; the exchange would be providing a service to the customer to store his property. In the event of the exchange’s insolvency, the customer’s claim against the exchange is not a personal one which would be merely a claim ranking pari passu with all other unsecured creditors. Instead, the customer would be entitled to his Bitcoins simply because they are his property and not the exchange’s. 

Defective Transactions 

Another scenario which could arise is where a transaction to convey Bitcoins is defective perhaps due to technological problems relating to a virtual Bitcoin wallet or a Bitcoin exchange. In either case, two causes are plausible: negligence or intentional wrongful acts. 

With respect to negligence, it is plausible that a claim in the tort of negligence could arise (barring any contractual relationship governing the subject matter of the claim). Nonetheless, whether the Courts would find a breach of duty on the part of the developer of a Bitcoin wallet software or the operator of a Bitcoin exchange would depend on the factual circumstances of the case. It is also difficult to postulate the type of loss that may be suffered in the event of a defective transaction. Supposing the harm resulting from the defective transaction is only the loss or invalidation of a Bitcoin, it would be uncontroversial to allow a claim for damages limited to the value of the Bitcoins in question. More problematic is where the defective transaction had resulted in pure economic loss, in which case, the principles of causation and remoteness as well as policy considerations would apply to limit the damages claimable. 

In the case of intentional wrongful acts, eg hackers executing denial-of-service attacks on an exchange or releasing a computer virus into the computer systems of an exchange, claims may be made by either the exchange or the customer of the exchange against the hackers, assuming their identities can be found (conflict of laws problems would probably also arise given the borderless nature of the internet). An exchange may be able to make civil claims against hackers on the basis of the tort of unlawful means conspiracy29 (insofar as the identifiable hackers had acted in agreement) or the tort of causing loss by unlawful means,30 assuming the wrongful act of hacking would make out the element of “unlawful means”. However, such claims by a customer of an exchange may be problematic as it is plausible that the intentionality requirement in both claims may not be made out (depending, of course, on the factual circumstances of the case). In this regard, the Singapore Court of Appeal in EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd [2014] 1 SLR 860 (CA) has recently upheld the principle that the unlawful means in the tort of unlawful means conspiracy (which is the same mental element as in the tort of causing loss by unlawful means31) must have been intended to cause loss to the claimant:32

A claimant in an action for unlawful means conspiracy would have to show that the unlawful means and the conspiracy were targeted or directed at the claimant. It is not sufficient that harm to the claimant would be a likely, or probable or even inevitable consequence of the defendant’s conduct. 

Even if the defendants had intended to cause harm to the customers of the exchange (and assuming evidence of this can be adduced), there is a further hurdle of showing that the unlawful act was targeted at an ascertainable class of persons at the time the unlawful act was committed or conspiracy was entered into.33


The phenomenon of Bitcoins is a fascinating technological development which is still unfolding. It raises a plethora of unsettled juridical and philosophical issues that are worth contemplation. In the light of the above discussion, Bitcoin exchanges and investors would do well to consider various risk management legal solutions to hedge their bets on this novel, yet potentially lucrative, technology. 

Gregory Vijayendran
     Rajah & Tann LLP
     E-mail: gregory.vijayendran@rajahtann.com

Ronald JJ Wong
     Rajah & Tann LLP
     E-mail: ronald.wong@rajahtann.com

* The views expressed in this article are the personal views of the authors and do not represent the views of Rajah &Tann LLP.


1 Deputy Prime Minister and Minister in charge of MAS, Mr Tharman Shanmugaratnam, “Reply to Parliamentary Question on Virtual Currencies”, MAS, Notice Paper 62 of 2014 (21 February 2014).

2 Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, Bitcoin.org. 

3 Kashmir Hill, “Bitcoin’s Incredible Year”, Forbes (1 January 2014). 

4 See https://Bitcoin.org/en/faq; Jerry Brito & Andrea Castillo, “Bitcoin – A Primer for Policymakers”, Mercatus Centre, George Mason University; available at: https://litecoin.org/; Reuben Grinberg, “Bitcoin: An Innovative Alternative Digital Currency” 4 Hastings Sci & Tech LJ 160.

5 “MtGox gives bankruptcy details”, BBC (4 March 2014); available at: http://www.bbc.com/news/technology-26420932. 

6 “Bitcoin hit by denial of service attacks as regulators prepare clampdown”, Reuters (11 February 2014); available at: http://www.reuters.com/article/2014/02/12/us-usa-Bitcoin-idUSBREA1A20X20140212. 

7 As at January 2014, it appears that few jurisdictions have regulated Bitcoins: Global Legal Research Center, “Regulation of Bitcoin in Selected Jurisdictions”, The Law Library of the United States Congress (Report for the United States Congress, January 2014). 

8 IRAS, “Income Tax Treatment of Virtual Currencies” (27 January 2014); available at: http://www.iras.gov.sg/irasHome/page04.aspx?id=15471.

9 MAS, “MAS to Regulate Virtual Currency Intermediaries for Money Laundering and Terrorist Financing Risks” (13 March 2014); see also Rajesh Sreenivasan, David Yeow, Hamidul Haq, Steven Tan, Tanya Tang, “MAS to Regulate Virtual Currency Intermediaries to Reduce Money Laundering and Terrorist Financing Risks”, Rajah & Tann Client Update (March 2014). 

10 Deputy Prime Minister and Minister in charge of MAS, Mr Tharman Shanmugaratnam, “Reply to Parliamentary Question on Virtual Currencies”, MAS, Notice Paper 62 of 2014 (21 February 2014).

11 George Wei, The Law of Copyright in Singapore (SNP Editions, 2000), pp 1187-1188.

12 Ng-Loy Wee Loon, The Law of Intellectual Property in Singapore (Sweet & Maxwell Asia, 2008), p 89, relying on AUVI Pte Ltd v Seah Siew Tee & Anor [1991] 2 SLR(R) 786. 

13 Section 30(2) of the Copyright Act (Cap 63); Ng-Loy Wee Loon, The Law of Intellectual Property in Singapore (Sweet & Maxwell Asia, 2008), p 101. 

14 See eg Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] 3 SLR 801 (CA) at [113]; and Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL), pp 573-574. 

15 Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 (HL), pp 573-574.

16 Re Mohamed Yunos Valibhoy [1991] SGHC 91 (HC)

17 Kevin Gray, “Property in Thin Air” (1991) 50 Cambridge Law Journal 252. 

18 National Provincial Bank Ltd v Ainsworth [1965] AC 1175, pp 1247-1248, per Lord Wilberforce; c.f. Kevin Gray, “Property in Thin Air” (1991) 50 Cambridge Law Journal 252, pp  292-293. 

19 Supra (note 17 above).

20 Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System”, Bitcoin.org. 

21 OBG Ltd v Allan [2007] UKHL 21 at [317]. 

22 Skandinaviska Enskilda Banken AB (Publ), Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd [2011] 3 SLR 540 (CA) at [110]; Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] 3 SLR 801 (CA) at [98]-[99]. 

23 Wee Chiaw Sek Anna v Ng Li-Ann Genevieve [2013] 3 SLR 801 (CA) at [112]. 

24 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL) at 560.

25 Rachel Leow and Timothy Liau, “Unjust Enrichment and Restitution in Singapore: Where Now and Where Next?” (2013) SJLS 331, pp 339-347.

26 Standard Chartered Bank v Sin Chong Hua Electric & Trading Pte Ltd and others [1991] 2 SLR(R) 445 (HC) at [26]-[27], relying on Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 (HL). 

27 OBG Ltd v. Allan [2007] UKHL 21 at [220]-[240] (per Lord Nicholls) and [304]-[317] (per Baronness Hale). 

28 OBG Ltd v. Allan [2007] UKHL 21 at [317]. 

29 See generally, EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd [2014] 1 SLR 860 (CA). 

30 See generally, OBG Ltd v. Allan [2007] UKHL 21. 

31 EFT Holdings, Inc and another v Marinteknik Shipbuilders (S) Pte Ltd [2014] 1 SLR 860 (CA) at [98]. 

32 Ibid, at [101].  


33 Ibid, at [111].