* Kelvin FK Low, Professor, School of Law, City University of Hong Kong.
** Wu Ying-Chieh, Assistant Professor, School of Law, Singapore Management University. We would like to thank Professors David Fox, George Gretton, Kung Chung Liu, and Dr Cheol Woong Go for their helpful comments and corrections on an earlier draft of this paper. The usual caveats apply.
10 Lewis and Dunkley (n 8).
15 See text accompanying nn 22–23.
25 See ch 5 of this book, ‘Virtual Currencies and the Conflict of Laws’, by Andrew Dickinson.
26 See eg Nathaniel Popper, Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money (HarperCollins 2015).
29 Charles Proctor, Mann on the Legal Aspect of Money (6th edn, OUP 2005) 12; for a more general analysis of this theory, see Georg Friedrich Knapp, The State Theory of Money (J Bonar and H M Lucas tr, Simon Publications 2003).
33 Shiomi Yoshio, The New General Rules of Obligations (Shinzansha Publishing 2017) 225 （潮見佳男, 『新債権総論I』, 信山社, 東京2017, 225 頁); Kohari Yoshiaki, ‘Legal Structure of Virtual Currencies’ (2017) 13 Hiroshima Law Review 1, 2 (小梁吉章, 「仮想通貨の法律構成」, 広島法科大学院論集, 第13号2017, 1、2頁).
39 Despite appearances, all three phrases refer to exactly same concept. Indeed, historically, they would even be written in exactly the same way because of the influence of the Chinese script on Japanese and Korean writing. The Japanese kanji characters for ‘bukkenhou’ reflect the traditional Chinese script adopted by the Japanese. The Chinese characters for ‘wùquánfǎ’ are in turn the same words in the simplified Chinese script. The Korean hangul characters are a syllabic simplification of the same characters, which until the early twentieth century, would have been represented in hanja, which was the same script as the traditional Chinese script.
40 All three phrases again, despite differences in phonology and logogram, refer to exactly the same concept and derive from the same historical characters.
41 All three phrases again, despite differences in phonology and logogram, refer to exactly the same concept and derive from the same historical characters.
42 For the different translations of the term ‘property’ in the various European jurisdictions, see George Gretton, ‘Ownership and its Objects’ (2007) 71 Rabels Zeitschrift für ausländisches und internationales Privatrecht 802.
43 After the Meiji Restoration in 1868, Japan opened its country to the world. It started to modernize the nation by learning from advanced western countries. As part of this modernization scheme, the reform of its legal system also proceeded. Initially, the French Civil Code was adopted as the model for importation since Japan wanted to have a set of written rules that could be immediately translated into Japanese. The first Japanese Civil Code based on the French Civil Code was completed in 1890 and ready to be enacted in 1893. However, the enactment of the German Civil Code resulted in an abrupt shift to the German Civil Code since it was (i) the newest Code in Europe, (ii) regarded as systematically well-structured, and (iii) written in a clear and simple style. The Japanese Civil Code modelled after the German Civil Code was finally enacted in 1898. For more detail, see Hiroshi Oda, Japanese Law (3rd edn, OUP 2011) 13–25; Curtis Milhaupt, J Mark Ramseyer, and Mark West, The Japanese Legal System (Foundation Press 2006) 34.
44 The Korean Civil Code came into force in 1960. The Japanese Civil Code was applied in Korea Peninsula after Japan annexed Joseon (the old name of Korea) between 1910 and the end of the Second World War in 1945. In other words, Korea accepted a Western Civil Code through Japan and adopted a Roman-Germanic system. Even though Korea was liberated in 1945, it could not draft its own Civil Code for more than a decade owing to the Korean civil war and its domestic political turmoil. The Korean Civil Code, which tried to address some of the perceived defects of the Japanese Civil Code, was finally enacted in 1960. For more detail, see Kwon Youngjoon, ‘Korea: Bridging the Gap between Korean Substance and Western Form’ in E Ann Black & Gary F Bell (eds), Law and Legal Institutions of Asia: Traditions, Adaptations and Innovations (CUP 2011) 151, 154–56.
45 An English translation is available at: <www.lawinfochina.com/display.aspx?lib=law&id=6642> accessed 2 August 2018. Besides statutes, judicial interpretations and selected leading authorities also have binding effect in China and are sources of law. For more information on them, see Jianfu Chen, Chinese Law: Context and Transformation (Brill 2016) 266–72; Seth Gurgel and Ping Yu, ‘Stare Decisis in China? The Newly Enacted Guiding Case System’ in Marco Wan (ed), Reading the Legal Case: Cross-Currents between Law and the Humanities (Routlege 2012) 142.
46 For more detail, see Shi Hong (ed), The General Provisions of the Civil Law of the People’s Republic of China (Peking University Press 2017) 3 (石宏 主编, 《中华人民共和国民法总则》, 北京大学出版社, 北京 2017, 第3页); Yang Lixin, A Study on the General Provisions of the Civil Law of China vol.1 (Renmin University Press 2017) 114–15 (杨立新, 《中国民法总则研究 上卷》, 人民大学出版社, 北京 2017, 第114-115页).
47 The Pandectae is one of the four parts of Justinian’s Corpus Iuris Civilis; For English translation, see Alan Watson, The Digest of Justinian Vols.1-4 (University of Pennsylvania Press 1998); the other three parts of the Justinian’s code are the Institutes, the Code, and the Novels. For the English translation of the Institutes, see Peter Birks and Grant Mcleod, Justinian’s Institutes (Cornell University Press 1987); unlike the German Civil Code, the French Civil Code is influenced by the Institutes.
48 Peter Stein, Roman Law in European History (CUP 1999) 32–37, 119-123; For more details on the differences between the French and German civil law, see Rene David and John EC Brierley, Major Legal Systems in the World Today (3rd edn, Stevens & Sons 1985) pt I; H Patrick Glenn, Legal Traditions of the World (OUP 2014) ch 5; Konrad Zweigert and Hein Kötz, An Introduction to Comparative Law (Tony Weir tr, OUP 1998) chs I and II; John H Head, Great Legal Traditions: Civil Law, Common Law, and Chinese Law in Historical and Operational Perspective (Carolina Academic Press 2011) ch 2.
50 For reasons of space, Books III, IV, and V are not dealt with here; but their fundamental structure (ie the General-Specific division) is identical to that of Book II.
51 Tsung-Fu Chen, ‘Transplant of Civil Code in Japan, Taiwan, and China: With the Focus of Legal Evolution’ (2011) 6 National Taiwan University Law Review 389, 418–21.
52 In the event of conflict between the General Principles of Civil Law 1986 and the General Provisions of Civil Law 2017, the latter prevails.
53 We see this all the time in relation to money in bank accounts, which are essentially debt obligations.
54 Yang Lixin, Real Rights Law (5th edn, Renmin University Press 2016) 26 (杨立新, 《物权法 第5版》, 人民大学出版社 , 北京2016, 第26页); Uchida Takashi, Civil Law I: The General Rules of Civil Law and the General Part of the Law of Real Rights (4th edn, University of Tokyo Press 2008) 353 (内田貴, 『民法I 総論.物権総論』, 東京大学出版会, 東京2008, 353 頁).
55 This idea derives from art 90 of the German Civil Code that restricts things to corporeal objects.
56 Wagatsuma Sakae, The General Rules of Civil Law (Iwanami Shoten Publishing 1965) 201 (我妻栄, 『新訂民法総則』, 岩波書店, 東京1965, 201頁); Uchida (n 54) 353; Matsuoka Hisakazu, Law of Real Rights (Seibundo Publishing 2017) 6, 14 (松岡久和, 『物権法』, 成文堂, 東京2017, 6、14頁).
57 Matsuoka (n 56) 7; For Professor Sjef van Erp, the whole debate on whether rights (ie intangibles) can be owned or not is a trap, created by pandectist legal thinking; for more detail, see Sjef van Erp, ‘European and National Property Law: Osmosis or Growing Antagonism?’ Sixth Walter van Gerven Lecture (2006) 18 <http://ssrn.com/abstract=995979> accessed 14 August 2018.
58 It is interesting to find that the Japanese Penal Code, art 245 expressly provides that electricity is a thing that can be the subject matter of the crime of theft.
59 Wagatsuma (n 56) 202; Uchida (n 54) 354; Matsuoka (n 56) 14.
60 The idea comes from the Swiss Civil Code, art 713, which prescribes that ‘Chattel ownership relates to movable physical objects and to forces of nature. …’
61 Kwak Yunjik, Law of Real Rights (Pakyoungsa publishing 1998) 289 (곽윤직, 물권법, 박영사, 서울 1998, 289면; Song Tucksoo, Law of Real Rights (3rd edn, Pakyoungsa publishing 2017) 269 (송덕수, 물권법 제3판, 박영사, 서울2017, 269면).
62 The General Provisions of the Civil Law of the People’s Republic of China has recently been enacted and has been drafted with the intent of being incorporated into the Civil Code as Book I of the future Code. For more information see Shi (n 46) 1–4; Yang (n 46) 114–15.
64 The official comment (立法理由, lìfǎ lǐyóu) on art 114 of the General Provisions of the Civil Law of the People’s Republic of China enforced in 2017 explains that ‘Assets can be divided into tangibles and intangibles, and real rights are those the object of which consists of tangible assets.’ Whilst there had been some doubt over the strictness of Chinese law in this respect prior to 2017, the official comment to art 114 clearly adopts the strict Germanic view.
65 See text accompanying n 40.
66 This was not always the case, and it may not always remain the case.
69 Suwon District Court Judgement, 7 Sep. 2018, no 2017 GODAN 2884 (수원지법 2018.9.7선고 2017고단2884); although the judgment has not been officially published, the present authors have the judgment on file in the original language. Extracts quoted in the text have been checked against this document for accuracy.
71 Suwon District Court Judgement, 30 Jan. 2017, no 2017 NO 7120 (수원지법 2017.1.30선고 2017노7120). The Korean court system has three main levels: District Courts, High Courts, and the Supreme Court. However, certain district court cases can be decided by a single judge, and the judicial panel of the same district court would deal with appeal cases. This case was initially decided by a single judge (n 69). However, the defendant appealed, and the appeal was heard by the judicial panel of the same district court.
73 The Korean Supreme Court Judgment, 30 May 2018 no 2018DO3619 (대판2018.5.30. 선고2018도3619); Kim Hyun-bin, ‘Top Court Recognizes Cryptocurrency as Asset’ (30 May 2018) The Korea Times <www.koreatimes.co.kr/www/news/nation/2018/05/488_249868.html> accessed 14 August 2018. Unfortunately, the court had not issued its grounds of decision at the time of writing.
77 新京报 (16 March 2017), 民法总则起草人：民法总则最大突破是规定基本规则, 中新网 at <www.chinanews.com/m/gn/2017/03-16/8175067.shtml> (in Chinese only). Notably, the drafter, Yang Lixin, also remarked that he preferred the first draft of the General Provisions of the Civil Law of China, which included virtual assets within the classification of real rights: ‘其实, 我觉得, 一审稿的规定更好, 虚拟财产放在物权客体中, 数据放在知识产权客体中。’ / ‘Actually, I consider the first draft’s classification to be better, virtual assets would be classified as objects of real rights, digital assets would be classified as objects of intellectual property rights.’
78 Yang Lixin, A Study on the General Provisions of the Civil Law of China vol.2 (Renmin University Press 2017) 654–55 (杨立新, 《中国民法总则研究 下卷》, 人民大学出版社, 北京 2017, 第654-655页).
81 When two or more identical things are mixed and cannot be distinguished, the people having ownership of them become co-owners and should share the things pro rata. See the Japanese Civil Code, arts 243, 244, and 245.
82 This right is prescribed in the Bankruptcy Act of Japan, art 62. So, whoever has ownership of a thing that becomes part of a bankruptcy estate is entitled to require the administrator in bankruptcy to segregate the thing from the bankruptcy estate. For example, if A asks B to keep A’s laptop computer for two weeks and B has become bankrupt in the meantime, A is entitled to require B’s administrator in bankruptcy to exclude A’s laptop computer from the scope of bankruptcy estate since there is no reason for B’s personal creditors to benefit from A’s laptop computer. In other words, A’s ownership, being a real right in its nature, takes priority over B’s other personal creditors.
83 Tokyo District Court Judgment, Heisei 26 (wa) no 33320, Heisei 27.8.5. (東京地方裁判所判決 平成26 (ワ) 年第33320号、判決平成27年８月５日), III. 2. (2). (Heisei denotes the current era in Japan beginning from 1989; Heisei 22 thus is the year 2010). Although the judgment has not been officially published, the present authors have the judgment on file in the original language. Extracts quoted are translations by one of the authors of a copy obtained from the court.
84 The nature of these rights is quasi-real; we will come back to this issue below.
85 For example, debts are protected by the law of obligation, and intellectual property rights are protected by a separate special statute. Whether or not these intangibles enjoy exclusive effect would depend on individual cases.
86 ie the claimant’s second argument.
87 In relation to the general characteristics of bitcoins, see II above.
88 s 3. 1. (3) of the judgment.
89 This is so since all transactions under the same blockchain system will be calculated, verified, and recorded by all the computers connected to the blockchain network system.
90 Therefore, the claimant’s first and third arguments were rejected.
91 s 3. 2 of the judgment.
92 Therefore, the claimant’s fourth argument was denied.
93 These areas form the four limbs of the Special Part of the Law of Obligations in Japan and South Korea (see Book III of the Japanese and South Korean Civil Codes). It is expected that this will probably also be the model that the new Chinese Civil Code will follow.
94 Kelvin FK Low and Ernie GS Teo, ‘Bitcoins and Other Cryptocurrencies as Property?’ (2017) 9 Law, Innovation & Technology 235, 238.
96 Jay Clayton and J Christoper Giancarlo, ‘Regulators Are Looking at Cryptocurrency: At the SEC and CFTC, We Take Our Responsibility Seriously’ (24 January 2018) Wall Street Journal <www.wsj.com/articles/regulators-are-looking-at-cryptocurrency-1516836363> accessed 14 August 2018; Jay Clayton, ‘Governance and Transparency at the Commission and in Our Markets’ (Remarks at the PLI 49th Annual Institute on Securities Regulation, New York, 8 November 2017) <www.sec.gov/news/speech/speech-clayton-2017-11-08> accessed 14 August 2018; Jay Clayton, ‘Chairman’s Testimony on Virtual Currencies: The Roles of the SEC and CFTC’ (Before the Committee on Banking, Housing, and Urban Affairs, United States Senate, 6 February 2018) <www.sec.gov/news/testimony/testimony-virtual-currencies-oversight-role-us-securities-and-exchange-commission> accessed 14 August 2018; Gary Gensler, ‘Ethics and Governance in the Blockchain Era’ (23 April 2018) MIT Technology Review <https://events.technologyreview.com/video/watch/gary-gensler-mit-blockchain-ethics-governance/> accessed 14 August 2018 (a transcript of which is available at Annaliese Mliano, ‘Everything Ex-CFTC Chair Gary Gensler Said About Cryptos Being Securities’ (24 April 2018) Coindesk <www.coindesk.com/ex-cftc-chair-gary-gensler-on-tokens-securities-and-the-sec/> accessed 14 August 2018.
102 Center for Rule-making Strategies, ‘Call for Rule-making on ICO: Proposal by ICO Business Research Group’ (5 April 2018) Tama University <www.tama.ac.jp/crs/2018_ico_en.pdf> accessed 14 August 2018.
104 The Japanese Civil Code, art 362; the Korean Civil Code, art 345; the Chinese Law of Real Rights, art 223.
105 Cf the judgment of the Tokyo District Court (n 83).
106 Uchida (n 54) 353–54; Cui Jianyuan, Law of Real Rights (4th edn, Renmin University Press 2017) 530.
107 The Japanese Civil Code, art 175; the Korean Civil Code, art 186; the Chinese Law of Real Rights, art 5; being influenced by German law, all three jurisdictions strictly apply this principle. However, it is interesting to find that German view of numerus clausus is said to be very strict even among European civilian systems; for more detail, see Bram Akkermans, ‘The Numerus Clausus of Property Rights’ in Michele Graziadei and Lionel Smith (eds), Comparative Property Law: Global Perspectives (Edward Elgar Publishing 2017) 100; it should, however, be stressed that some real rights have been created by customary law in Japan and South Korea. For example, the Japanese courts have regarded the right to use the hot spring of another’s land as a customary real right (The Japan Supreme Court Judgment, 18 Sep. 1940 Minshu 19-1611 (最判昭和15年9月18日民集19号1611)), and the South Korean courts have continuously accepted that the right to use another’s land for the purpose of preserving one’s ancestor’s monuments or graves as a customary real right (the Korean Supreme Court Judgment, 19 Jan. 2017 no 2013DA17292 (대판 2017.1.19 선고 2013다17292)). That said, no new real rights have been created by customary law for several decades. The reason some customary real rights were accepted long ago was to prevent some of the traditional land use rights not included in the Civil Code from being denied right after a Western style Civil Code was transplanted and enforced in these jurisdictions. It is highly unlikely that novel real rights would be created through customary law in the contemporary era.
108 The only other real possibility is that holders of such cryptocurrencies enjoy no protection under the law, but, outside Chinese law, this possibility is not seriously entertained.
109 Arthur Conan Doyle, The Sign of the Four (Spencer Blackett 1890) 93.
113 Wagatsuma Sakae, The Law of Real Rights (Iwanami Shoten Publishing 1983) 22 (我妻栄, 『新訂物権法』, 岩波書店, 東京1983, 22頁); Uchida (n 54) 368.
114 See the Korean Civil Code, arts 213, 214.
115 See the Korean Civil Code, arts 290, 301, 319, 370.
118 See the text accompanying n 69.
119 See the Japanese Civil Code, arts 244, 245; the Korean Civil Code, art 258.
120 This would be based on the concept of vindication pro parte in Roman law. Among cryptographers, there is no agreement as to the technically correct approach to mixtures: see Ross Anderson and others, ‘Bitcoin Redux’ (2018) Cambridge University Computer Laboratory <www.cl.cam.ac.uk/~rja14/> accessed 14 August 2018. But note that some of the techniques considered in the paper that are based on the common law concept of tracing would be inapplicable in China, Japan, and South Korea, which has no similar concept.
121 For a more detailed explanation of immutability, see Low and Teo (n 94) 254–57.
122 The Japanese Civil Code, art 709.
123 Uchida Takashi, Special Provisions of Obligations (3rd edn, Tokyo University Press 2011) 362–81. One thing to note is that the possibility of protection by tort law should not be a criterion of judging whether a right is a right in rem or a right in personam since, as art 709 shows, personal rights (such as a contractual right) are also protected if infringed by others. However, some conditions apply because of its personal nature. For more detail, see Wagatsuma Sakae, The General Part of the Law of Obligations (Iwanami Shoten Publishing 1964) 75–82 (我妻栄, 『新訂債権総論』, 岩波書店, 東京1964, 75-82頁).
124 The Japan Supreme Court Judgment, April 13, Saibansho Jihou 1505-12 (最判平成22年4月13日裁判所時報1505号12頁); Saibansho Jihou means the Court Law Report.
125 Cf. Song Tucksoo, The Special Part of the Law of Obligations (4th edn, Pakyoungsa Publishing 2017) 509–15 (송덕수, 채권법총론 제4판, 박영사, 서울 2017, 509-515면).
126 For more information about the meaning of fault under Chinese law, see Yang Lixin, Tort Law (Lawpress Publishing 2010) 59–62 (杨立新, 《侵权责任法》, 法律出版社, 北京2010, 59-62页).
127 Under Japanese and South Korean law, monetary compensation is the principal method of compensating the victim’s loss caused by another’s tortious act (see art 417 of the Japanese Civil Code and art 394 of the South Korean Civil Code). However, it is up to the court’s discretion to choose between the orders of specific recovery or monetary compensation in China (see art 15(2) of the Chinese Tort Law). It must be noted that, since tort law is part of the law of obligations, the order of specific recovery only bears the nature of personal right, so it would not accord to the claimant a preferred position in the tortfeasor’s bankruptcy.
128 This is a scheme that assists debtors to recover their economic credibility by allowing them to keep a certain amount of their capital money and rebuild their business so as to have a chance to fully discharge the debt they owe to the creditors.
138 Except in relation to cryptocurrencies or tokens issued pursuant to ICOs (initial coin offerings), for which see the text accompanying nn 95–103.
139 Shenzhen Court of International Arbitration Decision, Bitcoin Arbitration, 25 October 2018, para 4 of the essential points found in the summary of the decision. The decision of the tribunal has been published online in Chinese <https://mp.weixin.qq.com/s/U_qDgQN9hceLBbpQ13eEdQ> accessed 11 November 2018. The translation is supplied by the authors.