THIO SHEN YI SC ON CRYPTO ASSETS AND THE QUEST TO DEFINE THEM
Is a legal definition even necessary? Here’s why the joint Managing Partner of TSMP Corporation thinks it is.
BY ASHUTOSH RAVIKRISHNAN
Where were you when you first heard about crypto assets? Most people may not remember the moment too well, given the term’s gradual entry into our everyday speak over the past decade. But Mr Thio Shen Yi SC does—he remembers hearing about it a few years ago from his son, who was serving National Service at the time. “And he was telling me that he was planning to invest some money in this. I thought, ‘If millennials are getting into it, then it’s probably going to be the future,’ so I started reading up on it. It’s the same way I learnt about Facebook, Instagram, Twitter and TikTok all those moons ago, and look where we are today.”
And like most of us, he found that there was always something new to learn because the nature of crypto assets kept changing with technology. “They may have started as an aspirational currency of sorts but I think some of them have morphed into commodities or property or a hybrid currency. Then you’ve got NFTs, and although they can be easily conceived as property, you’ve also got people who argue that with fractionalisation of NFTs, they’re actually more like securities. And with Stablecoin, it is meant to be less volatile, so it can function as a medium of exchange, so it behaves more like a currency compared to say, Bitcoin. So maybe it shouldn’t be seen as property. And it goes on and on.”
Mr Thio succinctly illustrates the great debate of our time: so much is talked about crypto, but ask anyone what it actually is and you’ll likely get a host of answers, depending on who you ask. Courts around the world, too, are grappling with this question as more and more crypto matters appear before them. Some jurisdictions, like New Zealand, have gone ahead to rule that cryptocurrencies, despite their name, are actually property. “But Bitcoin is like no other property the law has traditionally recognised. Cryptocurrencies toggle between property, commodity or currency, depending on what rules are being applied, and who is enforcing them.”
It might be a tricky debate to wrap your head around, but to Mr Thio, it’s worth listening to all sides, simply because the world isn’t moving away from crypto assets any time soon. “Two or three years ago, my firm advised clients on Initial Coin Offerings. That was the flavour of the month. These days, we have moved towards advising clients on setting up crypto or digital exchanges. And with increasing pressure to entrench more regulatory frameworks, they’re inevitably going to look for legal advice to be on the right side of things.”
And more practically for lawyers, keeping a broad global overview allows you to make sense of which jurisdiction might be the most suitable to start an action, depending on your desired outcome. “Crypto assets are intangibles. They are everywhere and nowhere. If you know which jurisdictions see them as property and which see them as currency, then you can choose a forum that serves your client’s interests best. Some may call this forum shopping, I just see it as an inherent feature of international litigation.”
DIFFERENT JURISDICTIONS, DIFFERENT DEFINITIONS
The working theory in Commonwealth jurisdictions, he continues, is that cryptocurrencies are property. “But it’s so new and the nature of the asset is developing so much that we might never get more certainty than this working theory.” And he quips, that’s fine by him. “Ambiguity is great for disputes lawyers; but it is terrible for my corporate colleagues. What it means is that there are two legitimate sides to the discussion and the court has to eventually make sense of it. That’s interesting and exciting for a lawyer, because you’re helping to develop the law.”
Mr Thio has helmed TSMP’s disputes practice for over twenty years, so our conversation naturally turns to the nature of disputes in the crypto arena, especially those that he has helped arbitrate and litigate. “Most disputes so far have been focussed on remedies: how do you track down the perpetrator, freeze accounts or get effective orders that allow you to get restitution for your stolen cryptocurrency.”
And these disputes, he continues, are just scratching the surface of what’s to come. “In the next decade, you’ll see more disputes in crypto assets, blockchains, smart contracts, NFTs and DeFi. It’s exciting for young lawyers to be in the field; but what they should be focussing on are the solid commercial concepts: trusts, property law, and then apply them to this specific area.”
So in effect, there’s no need to get too carried away by the newness of it all. “The beauty of the common law is that it’s flexible. It can develop in response to innovation or technology. Once you determine that a crypto asset is property, it then implies that you can hold it on trust, you can theoretically collateralise it, transfer or will it away.”
The problem lies in the enforcement of these actions, given the abstract nature of crypto assets. “How do you force a person to give up the Bitcoin that he took from you? Short of beating the number out of the guy, you can’t do it. That’s assuming that you can even find out who the thief is, because all of these transactions operate with some degree of anonymity. That will be something to watch closely.”
As we end our interview, I ask Mr Thio a final burning question. Has he bought into the crypto craze himself? He smiles wryly before saying, “Not at all.”
Mr Thio joins a two-part SAL webinar that dives into crypto assets. Joining him are Mr Benedict Hamilton, Managing Director, Forensic Investigations and Intelligence, Kroll; Ms Rose Kehoe, Director, Restructuring and Disputes, Kroll; Mr Paul Seah, Senior Partner, Tan Kok Quan Partnership and Ms Yvette Anthony, Associate Director, LVM Law Chambers. Register here; note that registrations close at 9am on 18 November 2021
