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Digital Assets – Regulatory Framework and Emerging Legal Trends

July 2023

By Choo Yi XiJessie YinKhoo Hsiu Fen

A. Overview and Comparison of Regulatory Framework of Digital Assets in Different Jurisdictions

Digital assets may take the form of digital currency or digital token, these assets are created and stored digitally and only exist in digital form. They carry value and could be owned and transacted. Private keys are used to authorize transactions and prove ownership of such assets. The legal definition of digital asset is found under the Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019.

A brief comparison of the regulatory framework in Malaysia, Singapore and the UK is set out in the table below:





Governing Law

Capital Markets and Services (Prescription of Securities) (Digital Currency and Digital Token) Order 2019 (the “Order”).

Payment Services Act 2019 (“PSA”) – digital payment token.

Securities and Futures Act 2001 (“SFA”) – capital markets product.

Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs”).

Legislative Definition

The Order categorised digital assets into digital currency and digital token:-

(a) Digital currency: a digital representation of value which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise, that functions as a medium of exchange and is interchangeable with any money, including through the crediting or debiting of an account.

(b) Digital token: a digital representation which is recorded on a distributed digital ledger whether cryptographically-secured or otherwise.

Virtual currencies are referred to as “digital payment token” (“DPT”) under the PSA as any digital representation of value that:-

(a) is expressed as a unit;

(b) is not denominated in any currency and is not pegged by its issuer to any currency;

(c) is, or is intended to be, a medium of exchange accepted by the public or a section of the public as payment for goods or services or for the discharge of a debt;

(d) can be transferred, stored or traded electronically; and

(e) satisfies such other characteristics as the Monetary Authority of Singapore may prescribe.

“Cryptoasset” is defined in the MLRs as ‘a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically’.


Digital currency and digital token are deemed to be securities if they fulfil the criteria stipulated under the Order and will be subject to the Capital Markets and Services Act 2007 and fall under the purview of the Securities Commission of Malaysia.

Bitcoin and Ether are considered as DPT.

Regulation on Non-Fungible Token (“NFT”) is unclear. In general, NFT would not be regarded as a DPT because they cannot be a medium of exchange like cryptocurrencies. Each NFT is unique and one of its kind and hence, one cannot be exchanged for another. NFT is also unlikely to fall within the regulatory ambit of the SFA unless the NFT has the characteristics of a capital markets product under the SFA.

Three broad categories of cryptoassets which the Financial Conduct Authority (“FCA”) identified in its Guidance on Cryptoassets:

1.     Security tokens – tokens that amount to a ‘specified investment’ under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

2.     E-money tokens – tokens that meet the definition of e-money under the Electronic Money Regulations.

3.     Unregulated tokens – cryptocurrencies.

Cryptocurrencies are not regulated in the UK at the moment.


Securities Commission of Malaysia.

Monetary Authority of Singapore.

The Financial Conduct Authority does not regulate cryptocurrencies but only oversees the anti-money laundering regime.

Legal Tender

Not recognised as a legal tender.

Not recognised as a legal tender.

Not recognised as a legal tender.

B. Disputes Involving Digital Assets

Some of the key issues which are considered in disputes involving digital assets are, among others, whether digital assets are considered property, the jurisdiction and governing law of disputes involving digital assets, and the remedies available to an innocent party in cases of digital assets fraud or misappropriation.

There have been a few cases involving digital assets that have reached the Malaysian courts. One of such cases is the High Court case of Robert Ong Thien Cheng v Luno Pte Ltd & Anor [2020] 1 LNS 2194 which concerned the issue of whether a Bitcoin, as a form of cryptocurrency, can be construed as a “thing” that is capable of being returned under Section 73 of the Contracts Act 1950 in light that a Bitcoin does not take any physical or tangible form. The High Court found that Bitcoin is a form of commodity and security that has value attached to it in the same way as value is attached to shares. In arriving at its finding, the Court observed that the Contracts Act 1950 which had been drafted more than seven decades ago ought to be construed to reflect changes in modern technology and commerce.  

In comparison, the English courts have decided on a number of cases involving digital assets and provided clarification on the legal classification of the same. In the English case of AA v Persons Unknown Who Demanded Bitcoin on 10th and 11th October 2019 & Ors [2019] EWHC 3556 (Comm) which involved the issue of whether cryptocurrencies can be considered property and thereby be the subject of a proprietary injunction, the English High Court found that cryptocurrencies can be deemed as objects of property rights given that choses in action encompasses intangible property as well. Further, the High Court found that cryptocurrencies satisfy the four criteria of property i.e. being definable, identifiable by third parties, capable in their nature of assumption by third parties and having some degree of permanence. In light that the requirements for a proprietary injunction were met, the High Court granted the injunction sought in this case.

On the issue of ascertaining the jurisdiction and the governing law in relation to disputes involving digital assets, the English High Court in the case of Ion Science Ltd and Duncan Johns v Persons Unknown, Binance Holdings Limited and Payward Limited and Mirriam Corp LP (Unreported), 28 January 2022 provided insight on the same. The High Court held that the law of the place at which a digital asset is situated is determined by the place where the party which rightfully owns the digital asset is domiciled or has its registered office. In this case, English law would apply as the claimants were domiciled in England and Wales.

In cases of fraud or misappropriation of digital assets, it is notable that the English courts have been willing to grant, among others, an interim proprietary injunction and a worldwide freezing order relief against persons unknown despite evidence showing that only a relatively small part of what was transferred remained under the control of the persons unknown as seen in the case of Danisz v Persons Unknown & Huobi Global Ltd [2022] EWHC 280 (QB). This decision illustrates the English courts’ willingness to act swiftly in granting interim measures to minimise the repercussions of digital assets fraud which would result in out-of-jurisdiction dissipation of the same that are difficult to trace.

C. Digital Assets in International Arbitration

As digital assets are decentralised in nature and are used or traded across borders, digital assets disputes are often referred to arbitration.

The potential issues that may arise in digital assets arbitration are the evidence of title, enforcement of arbitral awards, risk of dissipation of assets and whether the digital assets dispute can rightfully be referred to arbitration when there is a class action waiver clause in the terms and conditions binding the users (purchasers of digital assets) which may be seen or argued as being against public policy as it minimizes exposure to class action liabilities.

The issue of ownership or title of digital assets was dealt with by the English High Court in Tulip Trading Ltd (a Seychelles company) v Bitcoin Association for BSV (a Swiss verein) and others [2022] EWHC 2 (Ch), where Tulip Trading claimed to have won Bitcoin worth over £3 billion, but alleged that its computers were hacked and private keys removed, hence it was unable to deal with its Bitcoin.

Tulip Trading brought a claim against the developers and software controllers. The decision of the English High Court, in allowing an order for security for costs against Tulip Trading, rejected Tulip Trading’s argument that there was a prima facie case of ownership in the security for costs application, which therefore raised the following issue. Given that ownership of the title of Bitcoin is based on a unique set of private keys, Tulip Trading’s claim for the developers to help it regain access without the private keys would effectively result in a bypassing the requirement of private keys, which is the proof of ownership.

Following an unsuccessful jurisdictional challenge by the developers in Tulip Trading Ltd (a Seychelles company) v Bitcoin Association for BSV and others, [2023] 4 WLR 16), the case would be set for trial. It remains to be seen as to how Tulip Trading will adduce evidence to prove its ownership of the Bitcoin.

Whilst arbitral awards are recognised and enforceable in countries acceding to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), there have been reported cases where enforcement of arbitral awards have been precluded as the jurisdictions are of the view that enforcing an award made in a crypto-related arbitration is against public policy of that jurisdiction. For instance, China is one of the few countries that do not recognize the legality of cryptocurrencies (see: Shenzhen Court’s decision in Gao v Shenzhen Yunsilu Innovation Development Fund Enterprise (2018)¹).

In Malaysia, Section 39 of the Arbitration Act 2005 provides that enforcement of an award may be refused if the High Court finds that the award is in conflict with the public policy of Malaysia.

Given that digital assets can be transacted quickly and discreetly, parties will have to consider seeking for injunctive relief to preserve their digital assets, such as that in AA v Persons Unknown Who Demanded Bitcoin on 10th and 11th October 2019 & Ors (supra) where a company had its computer systems encrypted by hackers and the insurer of the said company had to pay a ransom in the form of Bitcoin in return for the relevant decryption software. The insurer tracked the Bitcoin to a crypto currency exchange and successfully sought amongst others, an interim proprietary injunction against the hackers and the crypto currency exchange. In such a situation, parties may also consider the emergency arbitration mechanism to obtain urgent interim relief before the constitution of arbitral tribunal.

Another potential issue in digital asset arbitration is the validity of a class action waiver clause that can be found within the terms and conditions binding a user of a platform / purchaser of digital assets from the perspective of consumer protection, this issue was discussed in the Canadian Federal Court case of Difederico v, Inc 2022 FC 1256. It is common for the user terms to provide for a clause which prohibits a party from filing a class action legal proceeding against the other party, in which case a potential class action plaintiff would be bound by the arbitration agreement to commence individual arbitral proceeding which would be more costly than a class action legal proceeding.

This material is for general information only and is not intended to provide legal advice. If you have any queries regarding the above, please feel free to contact us at

  1. Guodong Du, Liu Qiang, Yuan Yanchao ‘Does Chinese Court approve Bitcoin Exchanges?’ (China Justice Observer, 16 May 2021) <> accessed 12 July 2023.