Cryptocurrency Not Recognised as Money, Singapore High Court Rules

April 21, 2023

The Singapore High Court recently rejected Algorand Foundation’s application to liquidate Three Arrows Capital based on a claim of 53.5 million USD Coin (USDC)—a form of cryptocurrency also known as a stablecoin, designed to maintain price equivalence to the US dollar—on the basis that cryptocurrency is not recognized as money under Singapore law. The decision raises further questions as to the legal status of cryptocurrencies and, in particular, the ability of creditors to initiate and pursue insolvency proceedings in Singapore based on a claim denominated in cryptocurrency.

Three Arrows, a Singapore-based cryptocurrency hedge fund, was set up in 2012 by Zhu Su and Kyle Davies and was reported by a blockchain analytics firm to have had an estimated $10 billion in assets under management at one stage. The cryptocurrency hedge fund was negatively impacted by the collapse of TerraUSD, a US dollar–pegged stablecoin, and sister token Luna in May 2022.

In June 2022, the Monetary Authority of Singapore (MAS) reprimanded Three Arrows for providing false information to MAS and exceeding the assets under management threshold allowed for a registered fund management company during two periods over 2020 and 2021. MAS also called into question the solvency of the fund managed by Three Arrows in view of recent developments.

Following a sharp decline in the value of bitcoin and other cryptocurrencies, Three Arrows began to default on its loan obligations. In June 2022, Voyager Digital, a cryptocurrency broker, issued Three Arrows with a default notice after it failed to make payments on a loan of 15,250 bitcoin (about $324 million at the relevant time) and $350 million worth of USDC. Subsequently, a court in the British Virgin Islands (BVI) ordered Three Arrows into liquidation following its failure to repay creditors.

On 22 August 2022, it was reported that the Singapore High Court granted a petition by Teneo, an advisory firm that had been appointed by the BVI court in June 2022 as the liquidators of Three Arrows, to recognise the liquidation order in Singapore. Recognition in Singapore would give the liquidators authority to request access to any financial records the fund kept locally. The order by the Singapore High Court granted the liquidators the power to, among other things, request for relief to require the production of books, papers, or other records relating to the promotion, formation, business, dealings, affairs, or property of Three Arrows.


Algorand Foundation filed a winding-up application (the Application) with the Singapore High Court to wind up Three Arrows, based on a cryptocurrency claim of 53.5 million USDC. The Application centred around whether Algorand’s claim, which is denominated in cryptocurrency, could be considered a “sum of money,” which would in turn determine whether Algorand was therefore a creditor entitled to proceed with the Application. Algorand argued that foreign currencies are recognised by Singapore law as money, despite not being legal tender or widely accepted or used as a medium of exchange in Singapore and that a similar principle could be applied to cryptocurrency.

The court rejected Algorand’s argument and the Application was dismissed. While the court held that Algorand had standing to bring about the Application, it did not accept that cryptocurrency is “money” for the purposes of a winding-up application as is the case in the Application. The basis for the court’s position was that the determination of “whether or not a particular intangible, such as cryptocurrency, is money would require a detailed examination of evidence which is not appropriate in the context of insolvency.” The court was of the view that “the word indebtedness . . . must require a debt which is in fiat currency” and that cryptocurrency was not money for such purposes.


The ruling could set a precedent for the legal status of cryptocurrencies. The Singapore High Court had previously been prepared to recognize that NFTs are a form of property as they fulfilled certain legal requirements, such as being easily distinguishable from one another and having owners capable of being recognised as such by third parties, with the caveat by the judge that the court’s decision was over an interlocutory application and a different conclusion may well be reached with the benefit of fuller submissions.[1]

Similarly, in the Algorand v. Three Capitals application, the court had noted that “determining whether or not a particular intangible, such as cryptocurrency, is money would require a detailed examination of evidence which is not appropriate in the context of insolvency.” This would suggest that the position remains somewhat open for now and that a different conclusion as to whether cryptocurrency is regarded as money could be reached with the benefit of a detailed examination of evidence. There may also be a need to better define such terms under statute.

The ruling further raises the question as to the ability of creditors to seek recourse on the basis of a cryptocurrency claim. Even if the court had recognized cryptocurrency claims as a money debt, this raises other ancillary issues relating to the valuation of digital assets and the classification of creditors (e.g., the classification of creditors who may hold different mixes of digital assets). It remains to be seen whether Algorand will appeal the ruling.

Tangentially, the International Swaps and Derivatives Association (ISDA) recently published a white paper that addresses certain legal issues raised by the recent bankruptcies of major cryptocurrency exchanges and market participants. The ISDA white paper, Navigating Bankruptcy in Digital Asset Markets: Netting and Collateral Enforceability, focuses on close-out netting arrangements, a credit risk protection mechanism used within ISDA documentation, and explores whether netting arrangements relating to digital asset derivatives are likely to be enforceable in certain major jurisdictions.

Close-out netting is a key feature of the ISDA Master Agreement for derivatives transactions and generally refers to arrangements that apply upon the early termination of two or more derivatives transactions. Upon the default of a party to the agreement (or similar event), all transactions are terminated and future payment and delivery obligations under those transactions are valued and netted in a single currency, resulting in a single net amount payable between the counterparties. Close-out netting is seen as an effective credit risk protection, as it allows parties to reduce (potentially unquantifiable) exposure to an insolvent counterparty by consolidating all economic exposures relating to their derivatives transactions into a single net sum.

In the ISDA white paper, ISDA analysis indicates that netting arrangements relating to digital asset derivatives are likely to be enforceable in certain major jurisdictions (including England and Wales and New York). However, the enforceability of netting in each jurisdiction will depend on the counterparty’s local insolvency law, some of which may exclude or omit digital assets from their scope of application.

Under Singapore law, the principle of mutual set off between an insolvent company and its creditors is recognized under common law and codified under Section 219 of the Insolvency, Restructuring and Dissolution Act 2018 of Singapore. However, following the court’s views in Algorand Foundation v. Three Arrows that cryptocurrency is not regarded as a money debt, it brings into question whether the mutual set-off principle would apply between an insolvent company and a creditor with a cryptocurrency debt. This in turn raises questions as to whether a creditor could use agreed upon netting arrangements to effectively take possession of, or foreclose on, cryptocurrency assets so as to set off against mutual credits, debts, or dealings and only have the balance as the debt provable in the judicial management or the winding up of the company, as the case may be. The question also arises as to whether netting arrangements can be achieved between and among a mixture of digital assets and fiat currency.

ISDA will begin work in 2023 to update netting opinions in relevant jurisdictions to cover digital assets. It also expects to publish a second white paper in the first quarter of 2023, focusing on issues relating to customer digital assets held with intermediaries, exploring specific questions on how they may be held, how those holdings might be treated in an insolvency scenario, and the relevant documentation and due diligence issues that would need to be addressed to achieve the intended level of customer asset protection.


Sharing insights and resources that help our clients prepare for and address evolving issues is a hallmark of Morgan Lewis. To that end, we maintain a resource center with access to tools and perspectives on timely topics driven by current events such as the global public health crisis, economic uncertainty, and geopolitical dynamics. Find resources on how to cope with the globe’s ever-changing business, social, and political landscape at Navigating the NEXT. to stay up to date on developments as they unfold. Subscribe now if you would like to receive a digest of new updates to these resources.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:


*A solicitor of Morgan Lewis Stamford LLC, a Singapore law corporation affiliated ‎with Morgan, Lewis & Bockius LLP

[1] Janesh s/o Rajkumar v. Unknown Person [2022] SGHC 264 at [69].