Singapore court’s cryptocurrency decision: Implications for cryptocurrency trading, smart contracts and AI

Posted in Artificial intelligence Technology and innovation Publication Financial institutions

Singaporean court’s decision in relation to cryptocurrency trading has implications for cryptocurrency trading mistakes, smart contracts, artificial intelligence and whether cryptocurrency is property

B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(l) 3, the Singapore International Commercial Court’s first cryptocurrency judgment, is significant as Simon Thorley IJ applies well-established contractual principles and considers the doctrine of mistake in the context of cryptocurrency trading mistakes and automated contracts entered through computer programming.   We discuss the key novel points arising from the case and consider the implications for digital assets, smart contracts and artificial intelligence.

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In B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(l) 3, Simon Thorley IJ sets out important guidance on how to apply the law of mistake in circumstances where legally binding contracts were performed by an automated contracting system without human intervention.  The court had to decide how to determine the question of knowledge of the parties when transactions were carried out by computers acting as programmed.  The court also had to consider whether cryptocurrencies constituted property capable of being held on trust, and what remedies were appropriate for breach of contract or breach of trust involving cryptocurrencies. 

There are now a number of reported instances of mistakes occurring in relation to cryptocurrencies.  It has been reported in 2019, for example, that a cryptocurrency exchange accidentally transferred cryptocurrency to clients by a computer error.[1]  Such situations raise novel issues which courts in many jurisdictions across the globe are grappling with, and they are often doing so in the absence of any direct authority or legislative guidance. 

Please see a briefing with further detail on the case and its implications here.

 

 

[1] Nikhilesh De, South Korean Crypto Exchange Coinzest is Looking To Take Back Cryptocurrencies Accidentally Sent to Clients in an Airdrop, Coindesk.com, https://www.coindesk.com/south-korean-exchange-loses-5-million-in-accidental-bitcoin-airdrop?amp, 21 January 2019.

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