SINGAPORE Law and Practice Contributed by: Tju Liang Chua and Ulanda Oon, Drew & Napier LLC
On substance and capital requirements, Singapore does not impose the economic substance or mini- mum capitalisation requirements commonly associat- ed with jurisdictions such as the British Virgin Islands and the Cayman Islands. The principal considera- tions for establishing a DeFi structure in Singapore are instead centred on compliance with applicable licensing frameworks and the appointment of locally resident directors. 5.3 Liability Singapore’s judiciary has, in a short timeframe, con- fronted a series of novel disputes arising from DeFi and the broader digital asset ecosystem. The courts have demonstrated a willingness to extend estab- lished common law doctrines – proprietary injunc- tions, breach of contract, tortious conversion and the law of damages – to circumstances involving NFTs, cross-chain bridge protocols and digital asset lending platforms. In 2022, the SGHC in the Janesh case issued a worldwide proprietary injunction to prevent the sale and transfer of a Bored Ape Yacht Club NFT (#2162) against a pseudonymous defendant (“chefpierre. eth”). The claimant had used the NFT as collateral on NFTfi, a DeFi lending platform where smart contracts automatically execute loan terms upon fulfilment of pre-set conditions. The claimant entered into a loan agreement, subject to express terms that the defend- ant would not exercise the foreclosure option with- out first granting the claimant opportunities to repay. Nevertheless, the defendant foreclosed, seized the NFT, refused further repayment and listed it for sale on OpenSea. The claimant brought claims in equita- ble proprietary interest, conversion, breach of contract and unjust enrichment. The judge allowed the appli- cation, holding that there was a serious question to be tried as to whether NFTs were capable of giving rise to proprietary rights. The Court also broke new ground on procedural matters, permitting substituted service via the defendant’s Twitter account, Discord account and cryptocurrency wallet messaging func- tion – recognising that blockchain-based disputes required novel approaches to enforcement of court process. At the time of writing, this injunction remains uncontested.
A critical dimension of accountability in DeFi is the ability to quantify loss. In Fantom Foundation v Mul- tichain Foundation Ltd & Anor [2024] SGHC 173 (the “Fantom case”), the SGHC addressed the valuation of cryptocurrencies in the context of contractual dam- ages. The claimant, Fantom Foundation, pursued two heads of claim. The first concerned the loss in value of wrapped cryptocurrencies following dissipation of underlying source assets deposited into the defend- ant’s multichain bridge. The second concerned the failure to return FTM tokens loaned to the defendant under a liquidity arrangement. In both claims, the Court assessed loss by reference to the dates of breach, though it refrained from sug- gesting that this would be the definitive approach in all cases given the volatile nature of cryptocurrency. The Court accepted different valuation methods for each claim. For the first, it relied on data from CoinMar- ketCap for pre-breach values and from SpookySwap (a DEX on the Fantom blockchain) for post-breach values as at the judgment date, accepting that prices were too volatile on the date of the security breach itself. For the FTM claim, the Court accepted a valu- ation based on the spot price of FTM traded against USDT on Binance at the date of breach. While the claimant adopted a conservative approach to pursuing its case, the Fantom case demonstrated the Court’s willingness to apply legal principles flex- ibly whilst remaining alive to the complexities of valu- ing cryptocurrencies, given the absence of objective pricing and the dramatic fluctuations characteristic of digital assets.
6. Payments and Stablecoins 6.1 Payments
Singapore permits the use of cryptocurrencies as a means of payment. There have been instances of M&A transactions and equity investments where the pur- chase consideration was settled in digital assets as well as secured financing transactions with security packages that included digital assets. There are no notable limitations on the use of cryptocurrencies for payment, after GST reform (see 1.2.4 Tax ).
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