Discussion on the Qualification of Virtual Assets as a Property
Authors:   Korean Civil Law Association, Kim SooJeong 
Published: April 2024

Whether virtual assets can be regarded as a ‘thing’ or ‘property has been widely discussed, because it can be a prerequisite to whether legal theories in property law and in bankruptcy law would be applied to virtual assets. Although financial regulatory Acts on virtual asset law are being legislated around the world, few countries have legislated how virtual assets will be understood in civil law. In this situation, Liechtenstein has in 2019 and Switzerland has in 2021 partially regulated civil legal issues of virtual assets in their Acts and UNIDROIT adopted its principles on digital assets in 2023. Liechtenstein’s TVTG(Token- und VT-Dienstleister-Gesetz) does not recognize virtual assets (tokens) as a thing, but restricts the concept and legal effects of tokens only within the Act. The Act distinguishes between de facto powers of disposition and justified right of disposition, but a person who has de facto power over a VT-key is considered to have legitimate right over the tokens associated with that key. In addition the disposal of tokens does not depend on the existence of a legal title (principle of abstraction), while the so-called causality principle prevails in Liechtenstein property law. If a token is disposed of without a legal title or if an initially existing legal title later ceases to exist, the legal transaction must be rescinded ex-nunc in accordance with the law of unjust enrichment. Considering the characteristics that the VT-system fulfills the registration function and has a high level of reliability, the possibility of acquisition in good faith is recognized. A significant part on civil legal issues in the DLT(Distributed Ledger Technologie) Act of Switzerland relates to ‘register uncertificated security’ (Registerwertrecht) which dematerializes securities using distributed ledger technology. The Swiss legislators additionally reviewed whether cryptocurrency could be considered a thing and concluded that it is unreasonable to extend the concept of natural forces to cryptocurrencies such as Bitcoin and that legal status on the blockchain can be claimed only to the participants in the blockchain system. Considering that cryptocurrency is not recognized as movable property, it is recognized as a type of intangible property. However, the Act recognized the right to separation for crypto-assets in general. This provision is enacted because it was practically necessary to determine whether crypto-assets belong to the bankruptcy estate when the wallet provider goes bankrupt. The DLT Act does not recognize general crypto-assets as a thing, but the right to separation of crypto-assets is recognized under certain conditions. The UNIDROIT Principles treat digital assets as being susceptible to being the subject of proprietary rights, without addressing whether they are considered ‘property’ under the other law of a State. The Principles don’t prescribe the specific requirements for a valid right of ownership in a digital asset or for it’s valid transfer. Instead, the principles provide a detailed definition of control, which assumes a role that is a functional equivalent to that of ‘possession’ of movables. However, ‘possession’ in this context is a purely factual matter and not a legal concept. But the concept of control serves as a necessary requirement for qualifying for protection as an innocent acquirer of a digital asset and as a method of third-party effectiveness and a basis of priority of security rights in a digital asset. It should be noted that a security right in a digital asset that is made effective against third parties by control has priority over a security right in the digital asset that is made effective against third parties only by a method other than control. A proprietary right in the digital asset remains effective on insolvency, but difficulties are expected if the insolvent person might refuse to reveal the password. In conclusion considering the char