28 October 2022

Singapore High Court finds that Non-Fungible Tokens (“NFTs”) can be considered “property”

What are NFTs?

An NFT is a unit of information recorded on a blockchain. NFTs are unique instances, and every token has a unique identification number for easy differentiation from other tokens in the same smart contract for that token. An NFT can be used to “tokenise” a digital file to produce a digital certificate of ownership that is stored on the distributed ledger which can subsequently be bought and sold.

Janesh s/o Rajkumar v Unknown Person [2022] SGHC 264 (“Janesh s/o Rajkumar”)

In Janesh s/o Rajkumar, the Singapore High Court found that NFTs can be considered “property”.

Background of the case

In Janesh s/o Rajkumar, the claimant brought an application for an injunction to restrain the defendant from dealing with his NFT, Bored Ape Yacht Club (“BAYC”) ID #2162. In determining whether to grant the injunction, the Court had to consider whether NFTs in general were capable of giving rise to proprietary rights which could be protected by an injunction.

NFTs as “property”

To determine whether NFTs constitute “property”, the Court applied the test set out in National Provincial Bank v Ainsworth [1965] AC 1175 (“Ainsworth”), namely 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”.

The Court found that NFTs satisfied the Ainsworth test, given that:

  1. NFTs are “definable” in that they are “capable of being isolated from other assets whether of the same type or of other types and thereby identified” as metadata, which is central to an NFT, distinguishes on NFT from another;
  2. An NFT has an “owner being capable of being recognised as such by third parties” as the presumptive owner of an NFT would be whoever controls the wallet which is linked to the NFT. Excludability is also achieved as one cannot deal with an NFT without the private owner’s key;
  3. NFT’s rights are also “capable of assumption by third parties”. The NFT owner’s exclusive ability to transfer the NFT to another party underscores the “right” of the owner. Further, NFTs are the subject of active trading in the markets; and
  4. The NFT has “some degree of permanence or stability”. The Court found that the NFT concerned, BAYC, has as much permanence and stability as money in bank accounts which, these days, exist mainly in the form of ledger entries and not cold hard cash.

Accordingly, the Court granted the proprietary injunction sought by the claimant with respect to his BAYC.

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