Case Update: B2C2 Ltd v Quoine Pte Ltd [2019] SGHC(I) 3; Quoine v B2C2 [2020] SGCA(I) 2 – SICC / Singapore Court of Appeal on cryptocurrency and mistake in contract formed using algorithm

Singapore Law; Legal; Lawyer

Singapore Court of Appeal (“CA“) decision in Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 2 is groundbreaking for its analysis of contract formation through a deterministic algorithm code. Case summary here.

The majority of the CA (Jonathan Mance IJ dissenting) decided on the following key points:

When analysing mistake for contract vitiation, if a contract was formed through deterministic algorithms (i.e. it always produces the same output given the same input), it is the programmer’s state of knowledge that is relevant and to be attributed to the parties: at [98].

The inquiry should be whether, when programming the algorithm, the programmer was doing so with actual or constructive knowledge of the fact that the relevant offer would only ever be accepted by a party operating under a mistake and whether the programmer was acting to take advantage of such a mistake: at [103].

The relevant time frame within which the knowledge of a programmer or the person running the algorithm should be assessed is from the point of programming up to the point that the relevant contract was formed: at [99].

The CA held it was not necessary to decide whether cryptocurrency, specifically BTC, was a species of property that was capable of being held on trust. No express trust arose over the BTC in B2C2’s account as there was no certainty of intention to create a trust. The mere fact that Quoine’s assets were segregated from its customers’ could not in and of itself lead to that conclusion. On the facts, the manner in which the BTC was stored militated against the finding of a trust: at [144] and [145].

The CA did comment in obiter dicta that “[t]here may be much to commend the view that cryptocurrencies should be capable of assimilation into the general concepts of property. There are, however, difficult questions as to the type of property that is involved”: at [144].

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Article: So you want to conduct an initial coin offering (ICO) or digital token sale?


So you are a tech startup who want to raise funds. You figure that instead of incurring debt, issuing equity, entering into convertible loan agreements (CLA), you will conduct an initial coin offering (ICO) or digital token sale. Not least because the amounts of money which have been raised by recent ICOs are huge. (I am using ICO because it is a shorter well-recognised abbreviation than “digital token sale”, even though the term ICO may be a bit of a misnomer.)

For every ICO that makes headlines, there are probably many ICOs which fall far below the issuers’ expectations. A lot of this of course is based on investors/purchasers’ sentiment and speculation. But some of that is also dependent on a few things like good marketing, viable underlying business model or technology, a credible team, and fair and reasonable terms of sale. If you do wish to build credibility for your ICO, there are some things which you would want to consider from a legal, regulatory perspective.

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Regulatory Update: MAS Guide to Digital Token Offerings

JUST IN. MAS Guide to Digital Token Offerings.

The case studies are very helpful in illustrating MAS’ position on whether certain scenarios fall within regulated activities under the Securities and Futures Act (SFA) or Financial Advisers Act (FAA).

Case study 1: tokens only give access rights to token issuer’s platform and pay for services on the same–not subject to SFA or FAA.

Case study 2: tokens to represent share in company which plans to develop property. Will constitute securities under SFA. Company may need to apply to be licensed financial adviser. Company will need to comply with prospectus requirements.

Case study 3: tokens enable holders to receive profits from company’s investments in a portfolio of shares in companies. Token holders have no powers relating to operations or management. Will constitute collective investment scheme (CIS). Company will need to comply with prospectus requirements, and likely will need to apply for capital markets services (CMS) licence.

Case study 4: token holders receive profits from investment in shares of portfolio of companies. Token issue not available to persons in Singapore. Part XIII of SFA will not apply. But company may be carrying on business of fund management in Singapore and may thus need to apply for CMS licence.

Case study 5: tokens represent loan by investor to startup. Token will be deemed a debenture and thus securities under the SFA. Company facilitating purchase or sale of token may require CMS licence.

Case study 6: company plans to set up virtual currency exchange platform. On the premise that no products regulated under SFA will be traded, SFA will not apply. If any token constitutes securities under SFA, then company may be operating a securities market and thus need to be approved as an exchange by MAS.

MAS clarifies approach to ICO or token sales

On 1 August 2017, MAS issued a press release clarifying its approach to initial coin or token offerings (ICO) or token issuance or sales. This note provides some comments on MAS’ clarification. It is of significant interest because there have been several ICOs conducted in Singapore recently, and has thus attracted interest in prospective issuers looking to raise funds by way of ICO. This comes shortly after the US Securities and Exchange Commission (SEC) announced that certain ICOs would amount to “securities”.

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