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Lloyd's Maritime and Commercial Law Quarterly


Hin Liu *

This article explores the legal nature of debt securities held on a blockchain. It is argued that there are two possible conceptualisations of these securities. First, they can be conceived as analogous to a documentary intangible, which is a paper document representing an underlying chose in action. Secondly, they can be viewed as analogous to a registration system in respect of the debt, where the blockchain provides information in relation to the underlying debt entitlements. In the final analysis, it is concluded that the registration model is to be preferred.


Digital assets have proliferated in the last few years: one need look no further than the seemingly endless varieties of blockchain assets (coins, bonds, shares, etc) and non-blockchain assets (new kinds of gaming tokens and computer software). Yet, despite some litigation,1 there is little certainty as to how these assets are likely to be classified in legal terms, and much research is needed to clarify their legal nature, given their importance in, for example, financial markets and international sales.
This article explores one particular type of digital asset: namely debt securities issued onto a blockchain (“blockchain securities”). There are two basic features of blockchain securities: a transferable blockchain “security token” issued to the investor (which represents the debt) and the underlying debt itself.2 Clarifying their legal nature is crucial to investors, who need to be reasonably certain of their legal entitlements before they would have the confidence to use the blockchain to trade securities. Also, societal players such as regulators, accountants and financial institutions need to know what legal rights
The legal nature of blockchain securities


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