A Study on the Legal Nature of Blockchain-Based Virtual Assets from a Civil Law Perspective : A Critical Introduction to the UNIDROIT Principles on Digital Assets and Private Law
Authors:   Institute of Legal Myungji Uiversity, Sin Jihye 
Published: February 2025

There is no longer any debate regarding the economic value of digital assets or virtual assets (“virtual assets”). It has also been confirmed through Korean Supreme Court precedents that virtual assets represent protectable property interests (Supreme Court Decision on November 11, 2021, 2021do9855, etc.). However, the legal nature of virtual assets has yet to be established. This article introduces and critically analyzes the Principles on Digital Assets and Private Law (“the Principles”) adopted by UNIDROIT.
There are two types of blockchain-based virtual asset transactions: (i) transactions that are directly recorded on the blockchain (“on-chain transactions”) and (ii) transactions conducted through virtual asset service providers, commonly known as exchanges (“off-chain transactions”). With regard to (ii), the Korean lower courts have characterized the relationship between exchanges and their customers as an “atypical contract of deposit” (Seoul High Court Decision on December 8, 2021, 2021na2010775), which aligns with the global trend of viewing such relationships as contractual in nature. Although the majority of virtual asset transactions are conducted off-chain, the Principles primarily focus on on-chain transactions, and the legal nature of virtual assets is more closely related to on-chain transactions. Therefore, this article will limit its discussion to on-chain transactions.
The most significant feature of the Principles is its regulation of the proprietary rights of virtual assets based on the factual concept of “control.” This concept appears to be influenced by the “controllable electronic records” outlined in Article 12 of the U.S. Uniform Commercial Code (“UCC”). In the context of Bitcoin, “control” can be understood as possessing the private key necessary for on-chain transactions. However, while the rights to virtual assets are attributed to the party exercising control, the introduction of the concept of control does not clarify whether the legal nature of virtual assets should be classified as real rights (rights in rem) or personal rights (rights in personam). Thus, it can be argued that the Principle merely formalizes a factual phenomenon without offering significant legal implications.
The Principles also address the good faith acquisition of virtual assets and the establishment of security interests based on the concept of control. These provisions aim to promote virtual asset transactions and reduce transaction costs. However, they face several practical challenges that hinder their effectiveness. First, due to the anonymity and decentralization characteristic of blockchain-based virtual assets, it is difficult to ascertain information about the counterparty in a transaction. Second, in terms of establishing concrete methods for security interests, only transfer security is feasible, limiting flexibility in collateral arrangements. Lastly, accurately assessing the value of the collateralized virtual assets presents significant difficulties, further complicating the practical application of these provisions.
Additionally, the Principles offer little guidance on the enforcement of virtual assets. In the context of insolvency proceedings, the principles are positively regarded for clarifying that rights acquired through control remain effective even against insolvency administrators. Moreover, the provision that virtual assets entrusted to custodians are not part of the custodian's bankruptcy estate and that the customer retains rights, such as the right of recovery, is perhaps the most practically significant aspect of the Principles.
As both the Principles and Article 12 of the UCC were drafted during the peak of virtual assets, it could be argued that these regulationss were somewhat hastily constructed. Both regulations are commendable for their attempt to legally regulate virtual assets and for recognizing their economic value.