In February 2021, the price of bitcoin reached a record-shattering high of US$58,330.57. Just two months later, on 14 April 2021, bitcoin surpassed that high and cleared the US$64,000 milestone, reaching as high as US$64,207. This trajectory has been nothing short of astounding - what was initially envisaged as an incentive for maintaining and growing the blockchain has now become one of the most lucrative asset classes in the world. The staggering rise of bitcoin has also spurred the creation and development of other cryptocurrencies (like ether and Dogecoin) and non-fungible digital assets. Resultantly, it has now become crucial for corporations and individuals to develop a keen understanding of crypto-assets1 and their associated commercial arrangements, in order to take part in the “crypto-revolution”.
This article builds upon the constant theme surrounding two of our previous articles - that of “trust” in the digital age. Our two previous articles had, among other things, shed light on the “trustworthiness” of electronic signatures and suggested ways in which individuals and corporations can mitigate their commercial risk, through the use of legal presumptions in the Singapore Electronic Transactions Act or technologies such as digital signatures.
In this article, we introduce a commercial arrangement relevant to the crypto-asset sphere - the crypto-asset escrow. Crypto-asset escrows are an arrangement where crypto-assets are held separately by a third party pending the fulfilment of the contracting parties’ respective obligations. This article evaluates some types of crypto-asset escrows that are currently available and explains the impact that crypto-asset escrows might have on their underlying commercial transactions. Purchasers and corporations seeking to transact items of value (in particular, high-value digital assets) may find the concepts covered in this article useful and relevant.
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