This post has been contributed by Professor William Swadling, Module Convenor for Equity and Trusts.
Given that Bitcoin are tradeable rights, it seems obvious that they can form the subject-matter of a trust. But in a recent decision of the Singapore International Commercial Court, the judge found this issue less than straightforward. The reason is that he wrongly thought that only ‘property’ can form the subject-matter of a trust.
The main dispute in B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 03 was a contractual one, although there was an alternative claim for breach of trust. That in turn depended on whether holdings of Bitcoin were held for the plaintiffs on trust. The main issue here turned on whether a trust had been declared in various documents, the judge holding that there was indeed an expressed intention to do so in the undertaking of the defendant to keep the rights in question separate from its own. But could those rights form the subject-matter of a trust? The judge saw the issue in terms of ‘property’, saying:
Quoine was prepared to assume that cryptocurrencies may be treated as property that may be held on trust. I consider that it was right to do so. Cryptocurrencies are not legal tender in the sense of being a regulated currency issued by a government but do have the fundamental characteristic of intangible property as being an identifiable thing of value. Quoine drew my attention to the classic definition of a property right in the House of Lords decision of National Provincial Bank v Ainsworth  1 AC 1175 at 1248:
“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”.
Cryptocurrencies meet all these requirements. Whilst there may be some academic debate as to the precise nature of the property right, in the light of the fact that Quoine does not seek to dispute that they may be treated as property in a generic sense, I need not consider the question further.
There are two issues here. First, the judge was wrong to think in terms of property per se. The word ‘property’ is ambiguous, and is used by many to describe a thing, as, for example, in the sentence: ‘That computer is my property’. On the other hand, it can be used to describe a type of right, as in the sentence: ‘A lease is a property right in respect of land’. Only the second usage is legally accurate.
Translated into the judge’s speech, this means he was saying that Bitcoin is a property right rather than any other type of right. On that, however, he was wrong. The hallmark of a property right, as your study of the Property Law module shows, is that it is capable of binding third parties. Although assignability is sometimes put forward as the test, as in the quotation from Lord Wilberforce in Ainsworth relied upon by the judge, this is incorrect. A lease of land may be incapable of assignment, but it is no doubt a property right. This is because it is capable of binding third parties, who will commit the wrong of trespass if they interfere with the lessee’s right to exclusive possession.
This is not the case, however, with Bitcoin, the rights involved binding no-one but the person who granted them, much like my right against the bank in which I have deposited money binds that bank and that bank alone. The rights, in other words, are personal.
So why did the judge adopt this wrong classification of Bitcoin? The answer is probably the insistence in some textbooks and judgements that the subject-matter of a trust is always ‘property’, which in turn leads judges to perform acrobatics in trying to force non-property rights into the mould of proprietary ones. A much better approach is to acknowledge that both personal and property rights can be held on trust, though exactly how far this goes is difficult to say. Can I declare a trust of my right to vote? Probably not, though not because my right to vote is not proprietary but because it would be against public policy to allow such a trust to exist.