Civil Law and Tokenised Property Structures

1. Introduction

Tokenised property structures are arrangements in which rights or interests connected with an asset are represented, recorded, transferred, or administered through blockchain-based tokens.

The underlying asset may be:

• real estate;
• shares;
• bonds;
• commodities;
• art;
• intellectual property;
• investment funds;
• contractual receivables;
• carbon credits; or
• other legally recognizable assets.

The critical legal distinction is between the token itself and the underlying property.

For example, if a token represents a 1% economic interest in a building, ownership of the token does not automatically mean that the holder owns 1% of the building. The legal effect depends upon the structure created by the relevant property, company, trust, securities, and contract laws.

2. Meaning of Tokenised Property

Tokenisation is the process of creating digital tokens that are legally or economically connected to an underlying asset or right.

A simplified structure may be:

Underlying Property → Legal Ownership Structure → Token Issuance → Blockchain Record → Token Holder

For example:

1. A company owns an apartment building.
2. The company issues 10,000 tokens.
3. Each token represents a defined economic or contractual interest.
4. Tokens are recorded on a blockchain.
5. Investors purchase and transfer tokens.

The investor may therefore own:

• a token;
• shares in the property-owning company;
• a beneficial interest under a trust;
• a contractual claim; or
• some combination of these.

These are legally different forms of ownership.

3. Why Legal Structure Matters

The blockchain can record that a person owns a token, but it cannot independently determine the legal consequences of that ownership.

The law must answer:

• Who owns the underlying asset?
• What rights does the token represent?
• Is the token itself property?
• Is the token transferable?
• Does transfer of the token transfer the underlying asset?
• What happens if the issuer becomes insolvent?
• Can the token holder enforce rights against the asset?
• What happens if the blockchain record is wrong?
• Can a court order transfer of the token?
• Which jurisdiction governs the structure?

These questions make tokenised property a major issue in modern civil law.

4. Main Models of Tokenised Property

A. Direct tokenisation

The token is intended to represent a direct proprietary interest in the underlying asset.

This model can be legally difficult where property law requires formal conveyancing or registration.

For example, transferring a blockchain token representing land may not itself transfer legal title to the land where local law requires a registered deed.

B. Company-based tokenisation

A company owns the underlying asset.

Investors acquire tokens representing:

• shares;
• economic participation;
• dividends; or
• contractual rights.

The investor therefore generally does not directly own the underlying property.

C. Trust-based tokenisation

A trustee holds the underlying asset.

Tokens may represent beneficial interests in the trust.

This model raises questions concerning:

• beneficiaries;
• trustee duties;
• beneficial ownership;
• transfer restrictions;
• tracing; and
• insolvency.

D. Partnership or joint-ownership model

Token holders may participate in a partnership or co-ownership arrangement.

This can create issues concerning:

• management;
• fiduciary obligations;
• partition;
• liability;
• transferability;
• accounting.

E. Contractual tokenisation

The token represents a contractual claim rather than ownership of the underlying asset.

For example, a token might give its holder the contractual right to receive:

• rental income;
• interest;
• a percentage of profits;
• redemption proceeds.

5. Token as Property

Modern courts have increasingly recognized that certain cryptocurrencies and digital assets can constitute property.

This is important because proprietary classification can permit:

• tracing;
• injunctions;
• restitution;
• constructive trusts;
• freezing orders;
• proprietary claims;
• insolvency protection.

However, recognition of the token as property does not automatically establish that the token holder owns the underlying real-world asset.

That distinction is fundamental.

6. Token Ownership Versus Underlying Asset Ownership

Consider:

A company owns a ₹100 crore building and issues 100,000 tokens.

A person purchases 1,000 tokens.

The legal consequences could be:

Model 1

The person owns 1% of the building.

Model 2

The person owns shares in the company that owns the building.

Model 3

The person has a beneficial interest in a trust holding the building.

Model 4

The person merely has a contractual right to receive 1% of specified rental income.

All four arrangements produce very different civil-law consequences.

7. Tokenised Real Estate

Real estate presents particularly difficult problems.

Land law commonly requires:

• written conveyances;
• registration;
• identification of the property;
• governmental records;
• formal execution.

A blockchain token cannot automatically override those statutory requirements.

Therefore:

Tokenisation of economic interests in real estate is generally easier legally than using a token alone as a substitute for statutory land conveyancing.

8. Tokenised Shares

Tokenisation can be used to represent corporate equity.

But company law may determine:

• who is a shareholder;
• how shares are transferred;
• what constitutes the company's register of members;
• voting rights;
• dividend rights;
• beneficial ownership;
• disclosure obligations.

Consequently, a blockchain record may be evidence of a transaction without necessarily replacing the legally recognized corporate register.

9. Tokenised Trust Interests

A trust structure may separate:

Legal ownership → Trustee

from

Beneficial ownership → Token holders

The trust deed may establish:

• voting rights;
• distributions;
• redemption;
• transferability;
• trustee powers;
• fiduciary duties.

A major civil-law question is whether the token holder has a proprietary beneficial interest or merely a contractual claim against the trustee.

10. Tokenisation and Contract Law

Tokenised property arrangements frequently contain several contracts.

These may include:

• issuance agreements;
• purchase agreements;
• custody agreements;
• trust deeds;
• shareholder agreements;
• platform terms;
• smart-contract terms.

Courts must determine how these documents interact.

A smart contract may technically transfer a token while the underlying legal agreement provides a different legal consequence.

The court therefore needs to distinguish:

technical execution from legal obligation.

11. Tokenised Property and Smart Contracts

Smart contracts may automatically:

• transfer tokens;
• calculate distributions;
• enforce voting;
• distribute rental income;
• liquidate collateral;
• redeem tokens.

However, automatic execution does not necessarily exclude traditional doctrines such as:

• mistake;
• fraud;
• duress;
• illegality;
• frustration;
• restitution;
• unjust enrichment.

The legal question remains whether the code correctly reflects the legally enforceable agreement.

12. Important Case Laws

1. AA v Persons Unknown [2019] EWHC 3556 (Comm)

This is a leading English authority concerning cryptocurrency as property.

The claimant's Bitcoin had been transferred in connection with a ransomware attack.

Principle

The court accepted that cryptocurrency could constitute property capable of supporting proprietary remedies.

Relevance to tokenised property

This establishes an important foundation:

A blockchain-based token can potentially constitute a proprietary asset in civil law.

Once that classification is accepted, remedies such as tracing and proprietary injunctions become possible.

2. Ion Science Ltd v Persons Unknown [2020] EWHC 2941 (QB)

This case concerned cryptocurrency fraud and unidentified defendants.

Principle

The court permitted civil procedural mechanisms to be used to trace and protect cryptocurrency following fraud.

Relevance

Tokenised property structures frequently involve pseudonymous holders and blockchain addresses.

The case demonstrates that courts can adapt traditional civil procedure to such transactions.

3. Tulip Trading Ltd v Bitcoin Association for BSV [2023] EWCA Civ 83

This is a major case concerning blockchain developers and responsibilities relating to digital assets.

Tulip Trading claimed that developers owed legal duties after access to digital assets was lost.

Principle

The Court of Appeal held that the proposed claims concerning possible duties owed by developers were sufficiently arguable to proceed.

The judgment did not establish that all blockchain developers automatically owe fiduciary duties.

Relevance

The case is important for tokenised property because it raises the question:

Who is legally responsible for protecting or restoring access to tokenised assets within a decentralized technological structure?

4. D'Aloia v Persons Unknown [2024] 1 WLR 3853

The dispute concerned cryptocurrency allegedly obtained through fraud and transferred through cryptocurrency wallets and exchanges.

Principle

The court addressed issues concerning tracing, identification of recipients, and proprietary remedies involving cryptocurrency.

Relevance

Tokenised property may pass through multiple digital wallets before the claimant discovers the fraud.

Traditional tracing principles can therefore become important in determining whether the original property can be followed.

5. Quoine Pte Ltd v B2C2 Ltd [2020] SGCA(I) 02

This Singapore case concerned cryptocurrency trading and automated transactions.

Principle

The court considered contractual and equitable principles in relation to transactions executed by automated systems.

The technological nature of the transaction did not eliminate traditional legal analysis.

Relevance

The case demonstrates that:

Blockchain code and automated execution do not necessarily displace contract law.

This is especially important where tokenised property is transferred through smart contracts.

6. Ruscoe v Cryptopia Ltd (in Liquidation) [2020] NZHC 728

This is one of the most significant cryptocurrency insolvency decisions.

Cryptopia, a cryptocurrency exchange, entered liquidation.

Principle

The court held that cryptocurrencies held for customers could constitute property and that customer holdings were held on trust.

Relevance

This is directly relevant to tokenised property structures.

If a platform merely holds tokenised assets for customers, the assets may potentially be treated differently from assets beneficially owned by the platform itself.

This can be crucial in insolvency.

7. ByBit Fintech Ltd v Xin [2023] SGHC 199

The Singapore High Court considered cryptocurrency and proprietary rights.

Principle

The court recognized the proprietary character of cryptocurrency and considered appropriate remedies concerning digital assets.

Relevance

The case reinforces the ability of traditional property remedies to operate in relation to digital assets.

8. Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387

Although not a token case, this is an important authority concerning proprietary claims and conflict of laws.

Principle

The characterization and priority of proprietary interests are generally determined by the law applicable to the property, particularly the lex situs principle.

Relevance

Tokenised property can involve participants, platforms, custodians, and assets located or legally connected with different jurisdictions.

The case illustrates why identifying the applicable property law is essential.

9. Williams & Glyn's Bank Ltd v Boland [1981] AC 487

This leading property case concerned a beneficial interest in land combined with actual occupation.

Principle

A beneficial interest can, under applicable statutory rules, bind a purchaser or mortgagee despite not appearing in the register in the ordinary manner.

Relevance

It provides an important analogy for tokenised real estate.

A blockchain record stating that a person owns a token cannot necessarily eliminate proprietary interests that arise under mandatory property law.

10. Suraj Lamp & Industries Pvt. Ltd. v State of Haryana, (2012) 1 SCC 656

The Supreme Court of India addressed so-called GPA sales and the transfer of immovable property.

Principle

A power of attorney or agreement to sell does not itself substitute for the legally required conveyance for transferring ownership in immovable property.

Relevance

This principle is highly significant for tokenised real estate in India.

A blockchain token representing land cannot, merely because it is recorded on a blockchain, bypass mandatory requirements for legally effective transfer of immovable property.

13. Tokenised Property and Trust Law

Trust structures are particularly attractive for tokenisation because they can separate:

Legal title from beneficial interest.

For example:

• Trustee = legal owner of property.
• Token holders = beneficiaries.
• Blockchain = record of beneficial interests.

However, the trust must actually satisfy the applicable requirements for creation and administration.

The mere statement:

"One token equals one beneficial interest"

does not necessarily create a legally enforceable trust.

Courts may examine:

• intention;
• certainty of property;
• certainty of beneficiaries;
• trust documentation;
• transfer mechanism;
• trustee powers.

14. Tokenised Property and Insolvency

Suppose:

1. A company owns ₹500 crore of property.
2. It issues tokens representing economic interests.
3. Investors purchase the tokens.
4. The company becomes insolvent.

The court must determine:

• Are the tokens claims against the company?
• Do token holders own an interest in the underlying property?
• Is the property held on trust?
• Are token holders secured creditors?
• Are they unsecured creditors?
• Can the liquidator sell the underlying property?
• Can token holders assert proprietary rights?

The answer depends upon the legal architecture of the arrangement.

15. Tokenised Property and Security Interests

A token may itself serve as collateral.

For example:

Borrower → pledges tokens → lender → loan

Legal issues include:

• perfection of the security interest;
• control;
• possession;
• priority;
• enforcement;
• valuation;
• volatility;
• insolvency.

Traditional secured-transactions law must therefore be adapted to digital assets.

16. Tokenised Property and Co-Ownership

Tokenisation can divide an economic interest among thousands of participants.

For example:

Building → 1,000 tokens → 1,000 economic participants

This resembles fractional ownership but does not necessarily create legal co-ownership.

True co-ownership may produce rights concerning:

• possession;
• partition;
• sale;
• management;
• accounting.

If the token represents merely a contractual interest, those rights may not exist.

17. Tokenised Property and Consumer Protection

Retail investors may be exposed to:

• misleading token descriptions;
• inaccurate claims concerning ownership;
• hidden fees;
• liquidity restrictions;
• unauthorized token issuance;
• platform failures.

A crucial disclosure principle should therefore be:

The issuer must clearly identify what the token actually represents.

A token described as "property ownership" may legally provide only a contractual or economic interest.

18. Tokenised Property and Fraud

Fraud can occur through:

• forged ownership documents;
• fake token issuances;
• stolen private keys;
• unauthorized minting;
• duplicate token representations;
• fraudulent smart contracts;
• manipulation of off-chain records.

A token may be technically authentic but still represent an invalid underlying claim.

Therefore, blockchain authenticity is not equivalent to legal validity.

19. Off-Chain and On-Chain Rights

One of the most important concepts is the relationship between:

On-chain rights

Rights recorded or implemented through blockchain technology.

Off-chain rights

Rights created by:

• contracts;
• statutes;
• deeds;
• company records;
• trusts;
• land registries.

A tokenised property structure works effectively only when these two systems are legally synchronized.

For example:

Land Registry → Company → Trust → Token Contract → Blockchain

If the blockchain says one person owns the token but the statutory land registry says another person owns the land, the blockchain record does not necessarily override the land registry.

20. Tokenised Property and Private International Law

Tokenised assets create difficult jurisdictional questions.

A transaction could involve:

• an Indian investor;
• a Singapore platform;
• a British trustee;
• a U.S. developer;
• real estate in Dubai;
• blockchain nodes distributed globally.

Courts may have to determine:

1. Which court has jurisdiction?
2. Which law governs the token?
3. Which law governs the underlying property?
4. Where is the token legally situated?
5. Can a foreign judgment be enforced?
6. Which country's insolvency law applies?

For immovable property, the law of the property's location remains especially important.

21. Remedies

Courts can potentially provide several civil remedies.

A. Proprietary injunction

Restricts dealings with disputed tokens.

B. Freezing order

Prevents dissipation of assets.

C. Tracing

Follows tokenized assets through subsequent transactions.

D. Restitution

Requires restoration of property or value.

E. Constructive trust

May impose equitable obligations over assets.

F. Declaration

Determines ownership or legal rights.

G. Damages

Compensates legally recognized loss.

H. Specific performance

May be available where contractual requirements justify it.

22. Tokenised Property and Digital Evidence

Courts may consider:

• blockchain transaction records;
• wallet addresses;
• transaction hashes;
• smart-contract code;
• private-key evidence;
• exchange records;
• custody agreements;
• token issuance documents;
• company registers;
• trust deeds;
• land records.

However, a blockchain record establishes a technological fact—such as a transaction occurring at a particular address—but the court must still determine its legal significance.

23. Governance Principles for Tokenised Property

A sound legal framework should require clarity concerning:

1. Underlying asset

What property is being tokenised?

2. Legal owner

Who owns the underlying asset?

3. Token rights

What exactly does each token represent?

4. Transfer rules

How can tokens legally be transferred?

5. Redemption

Can holders exchange tokens for the underlying asset?

6. Governance

Who controls the asset?

7. Custody

Who holds the underlying property?

8. Insolvency

What happens if the issuer fails?

9. Dispute resolution

Which court or arbitration mechanism applies?

10. Record synchronization

How does the blockchain record interact with statutory records?

24. Key Legal Distinctions

These distinctions prevent the common mistake of treating token ownership as automatically equivalent to ownership of the underlying asset.

25. Conclusion

Tokenised property structures represent a significant development in modern civil law because they divide or represent property rights through blockchain-based instruments. Their legal effectiveness, however, depends not merely on the technology but on the underlying legal structure.

The cases AA v Persons Unknown, Ion Science, Tulip Trading, D'Aloia, Quoine v B2C2, Ruscoe v Cryptopia, ByBit v Xin, Williams & Glyn's Bank v Boland, and Suraj Lamp demonstrate several important principles: digital assets can constitute property, traditional proprietary and contractual remedies can apply to blockchain transactions, customer assets may receive trust protection, and technological records do not automatically override mandatory property-law requirements.

The central civil-law principle is therefore:

Tokenisation can change the method by which economic interests are represented and transferred, but it does not automatically change the substantive legal requirements for ownership, conveyance, trust, security, or enforcement.

A legally robust tokenised-property system must connect the on-chain token with the off-chain legal right through a clear and enforceable structure.