DeFi Common Sense: Crypto‐backed Lending in Janesh s/o Rajkumar v Unknown Person (‘CHEFPIERRE’)
| Published date | 01 September 2023 |
| Author | Timothy Chan,Kelvin F.K. Low |
| Date | 01 September 2023 |
| DOI | http://doi.org/10.1111/1468-2230.12804 |
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Modern Law Review
DOI:10.1111/1468-2230.12804
DeFi Common Sense: Crypto-backed Lending in Janesh
s/o Rajkumar v Unknown Person (‘CHEFPIERRE’)
Timothy Chan∗and Kelvin F.K. Low†
One of the selling points of cryptoassets has been the ability to subject them to so-called ‘smart
contracts’ embedded upon blockchains; yet, despite numerous common law decisions accepting
cryptoassets as property,until Janesh s/o Rajkumar vUnknown Person (‘CHEFPIERRE’)no cour ts
have had the occasion to consider how such proper ty (in this case, an NFT) interact with these
‘smart contracts’. The case considers ‘smart contracts’ in the context of decentralised nance
(DeFi), thus also raising questions concerning the legal eectiveness and prudence of using
cryptoassets as objects of security. Although the non-participation of the defendant meant that
the court was deprived of full arguments, the judgment remains worthy of consideration, both
for what the court does consider – specically,criticisms of the Ainsworth test of property – and
what it does not.
INTRODUCTION
Decentralised nance (DeFi) through smart contract technology has been
touted as a major use case for blockchain technology ever since the launch
of the Ethereum blockchain. Advocates of DeFi believe that it will create a
‘global, open alternative to the cur rent nancial system’1by creating decen-
tralised platforms replicating a spectrum of nancial services including trading,2
insurance,3and cross-border money transfers.4One area within DeFi which has
received particular interest is secured lending.5From a relatively early stage it
was suggested that cryptoassets are susceptible to being used as security,6but
∗Sheridan Fellow,Faculty of Law,National University of Singapore.
†Professor, Faculty of Law, National University of Singapore. The authors would like to thank the
reviewers for their helpful comments and suggestions.All er rors remain our own.
1 Ethereum.org, ‘Decentralized nance (DeFi)’ updated 10 February 2023 at https://ethereum.
org/en/de/#de-use-cases [https://per ma.cc/R4JY-REHA].
2 Through ‘decentralised exchanges’ (DEXs) such as Uniswap at https://uniswap.org/ [https:
//perma.cc/6JEM-FWZH] and dYdX at https://dydx.exchange/ [https://per ma.cc/9DUR-
NZUB].
3 For example Nexus Mutual https://nexusmutual.io/ [https://perma.cc/83HR-TRFA] and In-
surace at https://www.insurace.io/ [https://per ma.cc/EYE6-F7X7].
4 See for example David Yae-Bellany, ‘Ukraine Gets $22 Million in Crypto Donations to
Fight Invasion’ New York Times 28 February 2022 at https://www.nytimes.com/2022/02/28/
business/ukraine-crypto-donations.html [https://per ma.cc/6F3P-G7GL].
5 Ben Far, ‘Why DeFi is the future of secured lending’ Radix Blog 6 March 2022 at https://
www.radixdlt.com/post/why- de-is-the-future-of- secured- lending [https://perma.cc/5E95-
9DPD].
6 See for example David Quest, ‘Taking Secur ity over Bitcoins and Other Virtual Currency’
(2015) 7 JIBFL 401; Phoebus Athanassiou, ‘Cryptocurrencies and their use as loan collateral:
© 2023 The Authors. The Modern Law Review published by John Wiley & Sons Ltd on behalf of Modern Law Review Limited.
(2023)86(5) MLR 1278–1293
Thisis an open access ar ticle under the terms of the CreativeCommons Attr ibution License,which permits use,distr ibution and reproduction
in any medium,provided the original work is properly cited.
Timothy Chan and Kelvin F.K.Low
it was posited that legal uncertainty hindered such transactions. The Chan-
cellor of the High Court, for example, suggested in 2019 that uncertainty
over whether cryptoassets were property hindered such secur ity arrangements.7
Since then,both scholar s8and the courts9have coalesced around the conclusion
that cryptoassets are property for at least some purposes,10 but the legal viabil-
ity of crypto-backed lending remains in doubt. One obstacle lies in crypto’s
widespread preference for pseudonymity,11 since traditional methods of secu-
rity require court intervention for enforcement of rights either on the part of
the lender12 and/or the borrower.13 Unsurprisingly, such concerns have not
dissuaded the crypto industry from steaming ahead with the collateralisation
of cryptoassets in the absence of legal certainty. In line with the ‘code is law’
ethos of the blockchain movement,14 lenders and borrowers have turned to
smart contracts15 to mimic the eect of security within the legal system. But
this raises new and arguably more dicult questions. How do such smart con-
tracts interact with the legal rules governing the characterisation of security
agreements? In whom does title in the secured asset vest for the duration of
the loan? More pertinently, in light of recent events, are cryptoassets inherently
unsuitable as security?
Until Janesh s/o Rajkumar vUnknown Person (‘CHEFPIERRE’)16 (Chef-
pierre), no common law court has had occasion to consider these issues in
core legal considerations’ (2019) 6 JIBFL 394;Michael Bridge and others (eds), The Law of Per-
sonal Property (London: Sweet and Maxwell,3rd ed, 2022) para 8-058; Xavier Foccroulle Ménard,
‘Crypto lending: Legal implications for taking security interests in cryptocurrency’ Norton Rose
Fulbright 20 April 2022 at https://www.nortonrosefulbright.com/en/knowledge/publications/
cb6900ed/crypto-lending- legal-implications-for- taking-security- interests-in-cr yptocurrency
[https://perma.cc/K3QQ-NQLS].
7 Sir Georey Vos, ‘Cryptoassets as property: how can English law boost the con-
dence of would-be parties to smart legal contracts?’ Joint Northern Chancery
Bar Association and University of Liverpool Lecture, 2 May 2019, paras 40, 61 at
https://www.judiciary.uk/wp-content/uploads/2019/05/Sir- Georey-Vos-Chancellor-
of-the-High- Court-speech- on-cryptoassets- 2.pdf [https://perma.cc/S5AG-PAYA].
8 Bridge and others (eds), n 6 above, para 8-050; David Fox, ‘Cryptocurrencies in the Common
Law of Property’ in David Fox and Sarah Green (eds), Cryptocurrencies in Public and Private Law
(Oxford: OUP, 2019) para 6.07; Kelvin F.K.Low and Ernie G.S. Teo, ‘Bitcoins and other cryp-
tocurrencies as property?’ (2017) 9 Law, Innovation and Technology 235; Lucy Chambers, ‘Mis-
appropriation of cryptocurrency: propelling English private law into the digital age?’ (2016)
5 JIBFL 263; João Marinotti, ‘Tangibility as Technology’(2021) 37 Georgia State University Law
Review 671.
9AA vPersons Unknown [2019] EWHC 3556 (Comm); [2020] 4 WLR 35; Osbourne vPersons
Unknown [2022] EWHC 1021 (Comm); Danisz vPersons Unknown [2022] EWHC 280 (QB);
YanYuYingvLeung Wing Hei [2021] HKCFI 3160; Zi Wang vGraham Darby [2021] EWHC
3054 (Comm); [2022] Bus LR 121; B2C2 Ltd vQuoine Pte Ltd [2019] 4 SLR 17; Ruscoe v
Cryptopia Ltd (in liq) [2020] 2 NZLR 809.
10 So far, the cases have focused on whether cryptoassets can be the subject of proprietar y injunc-
tions, be the subject-matter of trusts,or are property in an insolvency rather than whether they
are property for all purposes, if such a concept exists.
11 See for example Low and Teo,n 8 above,238.
12 For example court-ordered foreclosure or the appointment of receiver s.
13 For example where the borrower-mortgagor seeks to enforce an equity of redemption.
14 cf Karen Yeung, ‘Regulation by Blockchain: the Emerging Battle for Supremacy between the
Code of Law and Code as Law’(2019) 82 MLR 207.
15 For our preferred denition of a ‘smart contract’, see text to n 89 below.
16 [2022] SGHC 264.
© 2023 The Authors. The Modern Law Review published by John Wiley & Sons Ltd on behalf of Modern Law Review Limited.
(2023) 86(5) MLR 1278–1293 1279
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