It is often thought that the law is slow, and unable to keep up with technological change - although it is important to note that this is not always the case.
More often than not, the law is sufficiently clear, but is effectively sitting in wait for someone to launch a challenge over a new piece of technology, in order for it to actually be applied.
Whilst cryptocurrency is a relatively recent invention, the case of B2C2 Ltd v Quoine Pte Ltd  has confirmed that this new form of currency can be held to the same rules and restrictions as other more established currencies, and that it can be legally defined as property.
Background to the Case
The defendant in this matter is Quoine Pte Ltd (Quoine), a company which operated a currency exchange platform set up to enable third parties to trade standard currencies (e.g. Singapore or US dollars), as well as a range of cryptocurrencies.
The plaintiff, B2C2 Ltd (B2C2) traded on Quoine's platform.
The current dispute between the two parties involves two separate cryptocurrencies - Bitcoin (BTC) and Ethereum (ETH) - of which Bitcoin has historically had a higher value, as was the case at the time that this dispute was initiated.
In April 2017, the plaintiff was involved in seven separate trades, through which it sold ETH at a rate of about 10 BTC for the price of 1 ETH. This rate was close to 250 times the going rate of roughly 0.04 BTC to 1 ETH. The earnings of 3092.517116 BTC were automatically credited to B2C2's account, and a corresponding amount of 309.2518 ETH was automatically debited from its account.
The next day, the Chief Technology Officer of Quoine discovered that these trades had taken place. He realised that a serious error had occurred, in turn deciding to cancel the trades, with the transactions subsequently being reversed.
One key legal issue ultimately accepted by both parties related to how the relevant law was to be applied to cryptocurrency, taking into account the fact that it does not take the form of property in a traditional sense. At the time of the dispute (and as is still the case) cryptocurrencies were only available online - meaning that they are intangible. They don't really exist but for the programming and electronic software that creates and supports them.
The trust aspects of this case required certainty of subject matter, so the question of whether cryptocurrencies could be legally defined as "property" was a material consideration in this matter.
Both the court and the relevant parties ultimately accepted that the law would treat cryptocurrencies as property - they did not need to create a new definition, as it fell within the current general definition of property being that 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 (National Province Bank v Ainsworth  AC 1175).
Contract Issues - The parties' positions
B2C2 decided to commence legal proceedings against Quoine in May 2017, alleging that Quoine had no contractual right to cancel the trades once the orders had been effected. B2C2 claimed that Quoine's reversal of the trades was in beach of the Terms and Conditions in place at the time that the trades were made, and was therefore a breach of contract.
B2C2 also claimed that as Quoine had held B2C2's account earnings on trust for it, the unilateral withdrawal of the BTC which had been credited to the account was similarly in breach of trust.
Quoine's defences included:
- That the right to reverse the trade was implied;
- That the contract was void for "unilateral mistake" at common law;
- That the contract was voidable for "unilateral mistake" in equity;
- That the contract was void for "mutual mistake" at common law; and
- Unjust enrichment.
Decision of the Singapore International Commercial Court
The Court found Quoine liable for both breach of contract and breach of trust in reversing the trades that had been made at an abnormal exchange rate. In determining the matter, the Court was able to apply existing contractual and trust laws. There was no need to create new laws or consider amending existing laws to deal with the fact that the subject matter of the contract and trust were cryptocurrencies.
The Court was able to apply existing contractual and trust laws in its finding that Quoine was indeed liable for both breach of contract and breach of trust in its reversal of the questionable trades. As such, there was no need to create new laws, or consider the amendment of existing laws in order to deal with the fact that the subject matter of the contract and trust were cryptocurrencies.
The judgement handed down in the case of B2C2 Ltd v Quoine Pte Ltd  is of particular relevance, as it is one of the first judgments to:
- Apply the law of contract to cryptocurrencies;
- Find that cryptocurrencies have the hallmark characteristics of property; and
- Apply the law to a case involving algorithmic trading.
If you have a query relating to any of the information in this blog, or you would like to speak with a member of Holman Webb's Business, Corporate and Commercial team with regard to a matter of your own, please don't hesitate to get in touch today.