Taming the Intangible: MtGox Judgment Translated into English

A Japanese judgment relating to the MtGox bankruptcy proceedings has been translated into English. The judgment addresses property rights in bitcoins. Under Japanese law, only tangible things can be the object of ownership. This bars bitcoin holders from proprietary protection. In civil law jurisdictions that do not have this corporeality requirement, part of the solution may lie in the analysis of Bitcoin as a multi-party agreement.

MtGox, once the world’s largest bitcoin exchange, filed for bankruptcy protection in Tokyo on 28 February 2014. Bankruptcy proceedings began on 16 April 2014. One unhappy MtGox user brought a lawsuit against MtGox and its bankruptcy trustee in order to retrieve more than 458 bitcoins from the exchange. On 5 August 2015, a lower court in Tokyo, Japan, passed a judgment in this case. In its judgment, the Japanese court takes a stand on the nature of Bitcoin as property under Japanese law. Academics at Oxford University’s Commercial Law Centre at Harris Manchester College have now made available an annotated unofficial English translation of the judgment.

The plaintiff relied on the right of segregation of Article 62 of the Japanese Bankruptcy Act, which, freely translated, provides as follows: “The commencement of bankruptcy proceedings shall not affect a right to segregate, from the bankruptcy estate, property that does not belong to the bankrupt […]”. The plaintiff alleged that the relevant bitcoins, of which MtGox has taken possession, do not fall within the bankruptcy estate, because they are owned by him. He therefore requested that the 458+ bitcoins be transferred to him.

Touching the Intangible

A major hurdle that had to be overcome for this claim to succeed, was to convince the judge that bitcoins can be the object of property rights under Japanese law. Unfortunately for the plaintiff, Japanese law only recognises property interests in tangible things (as per Article 85 of the Japanese Civil Code).

The plaintiff’s reasoning for arguing that a bitcoin is in fact a tangible thing, is paraphrased in the judgement as follows: “The electronic record held on a number of electronic computers embodies the bitcoin and is not merely a record of it, so that bitcoin has an existence; and therefore it is possible to subject it to exclusive control, thus it is the object of ownership, corresponding to a “thing”, that is, a tangible thing, under Article 85 of the Civil Code.” (emphasis mine)

The court is not convinced by the ’embodiment’ argument. It has a strict reading of the corporeality requirement, according to which even things that can be physically observed, such as electricity, are excluded from being a ‘tangible thing’. Referring to Bitcoin’s digital and internet-based nature, the court holds that “it is obvious that bitcoin has no corporeality which occupies space.”

The corporeality requirement in Japanese law seems to be a trace of the influence German law had on the codification and ‘westernisation’ of Japanese law in the late nineteenth century.1 The German Civil Code provides, in its § 90, that “Sachen im Sinne des Gesetzes sind nur körperliche Gegenstände.” It is also interesting to see how closely the Japanese court’s understanding of a tangible thing (“A tangible thing shall be defined as an object which occupies space such as liquid, gas, substance”) resembles German commentators’ understanding (“Körperlichkeit bedeutet das räumliche Zutagetreten von Materie (fest, flüssig, gasförmig) in beherrschungsfähiger Einheit.”).2

While bitcoins are not securities,3 similar discussions can be found in the literature on property in securities. To civil lawyers such as myself, the bone of contention summarized in the MtGox judgment may be reminiscent of the French ‘théorie de la scripturalisation’ which was developed in the 1990s in respect of book-entry securities. French legal scholars sought to extend the protection of bona fide purchasers provided for by Articles 2276-2277 of the French Civil Code to book-entry securities. The problem was that, much like in the MtGox judgment, these rules applied only to tangible things. Therefore, scholars argued that a credit entry in a securities account in fact ‘reifies’ the securities; the credit entry ‘embodies’ the security (cf. the plaintiff’s reasoning above), such that the credit entry must be considered a tangible thing.4

Taming the Intangible

The ‘scripturalisation’ theory may be the closest one will get to touching the intangible. Yet, without the support of express statutory provisions, it is unlikely to defeat rigid corporeality requirements such as the one found in the Japanese Civil Code.

In other jurisdictions, for instance in England and Wales, ownership can also be acquired in intangibles, such as choses in action. In commenting on the judgment, Professor Gullifer, Professor Hara and Professor Mooney give the example of a bank account: “The bitcoin blockchain is merely a ledger, and what is recorded are just transactions relating to bitcoin. In English law, we might think of this as analogous to the ledger of transactions involving a bank account. However (in English law though not, technically, in Japanese law) the bank account itself can be owned since it is a debt owed by the bank to the account holder, that is, a chose in action which is classified as intangible property. The ledger is just a record of transactions concerning this chose in action.” They are of the view, however, that “Bitcoin is definitely not a chose in action. Thus, the bank account analogy does not work, and a different analysis is needed for it to be the object of ownership even in English law.”

In civil law jurisdictions, where the concept of ‘choses in action’ does not exist, part of the solution for providing proprietary protection to a holder of bitcoins may be at hand. One of my colleagues at Ghent University, Simon Geiregat, analysed Bitcoin from a Belgian law perspective.5 He found that bitcoins can be regarded as personal claims (schuldvorderingen, créances, Forderungen). Bitcoin can be regarded as a multi-party agreement. Whoever has a Bitcoin wallet accedes to this multi-party agreement. The Bitcoin user thus becomes the holder of a contractual claim against anyone and everyone else who enters into the agreement. The holder of the Bitcoin wallet can rightly expect that these counterparties will accept her bitcoins if she has a payment obligation towards one of them, unless expressly agreed otherwise. At the same time, she has an identical obligation towards any and all other Bitcoin users. In other words, by acceding to the multi-party Bitcoin agreement, the Bitcoin user acquires a personal claim against (and at the same time becomes obligor of) all other Bitcoin users.6

Moreover—at least under Belgian law—personal claims can be the object of ownership, and proprietary protection of personal claims can be enforced through revendication.7 The only way in which the claim of a Bitcoin user can usefully be redeemed, consists of knowing the private key to a public key on which a so-called ‘unspent transaction output’ is registered.8 In other words: the bitcoins have to be ‘in your account’ for you to be able to spend them. Thus, a revendication would mean that the bitcoins (i.e., the ‘unspent transactions outputs’) have to be transferred to a public key designated by the plaintiff. This is the result that the plaintiff in the MtGox case sought to obtain by bringing the lawsuit. From this perspective, the intangible nature of bitcoins should not prevent the proprietary protection of the holder.


  1. See H. Patrick Glenn, Legal Traditions of the World (2nd ed., OUP 2004) 328.
  2. L. Michalski, in H.P. Westermann, Erman Kommentar. Bürgerliches Gesetzbuch (Aschendorff 2000) 222, para 3, cited by Caroline Lebon, Het goederenrechtelijk statuut van schuldvorderingen (PhD thesis, KU Leuven 2006) 100, para 108.
  3. Primarily because bitcoins lack an issuer, i.e. a single entity that seeks to attract funding in return for securities, which represent certain claims on the issuer. Miners are not issuers in this respect, because bitcoins do not represent claims on a miner.
  4. See Didier R. Martin, ‘La théorie de la scripturalisation’, in H. de Vauplane (ed), 20 ans de dématérialisation des titres en France: Bilan et perspectives nationales et internationales (Revue Banque 2005) 60 paras 11-12, cited by Lientje Van den Steen, De effectenrekening (Intersentia 2009) 569 para 858. Under German law, a credit entry on the securities account of the seller amounts to a representation that entitles the purchaser to assume that the seller had authority to sell the securities represented by that credit entry. For this reason, the general view of German legal scholars is that the rules protecting bona fide purchasers apply to book-entry securities (Eva Micheler, Property in Securities: A Comparative Study (Cambridge University Press 2007) 212-215).
  5. Simon Geiregat, ‘Eigendom op bitcoins’ (2018) 81 Rechtskundig Weekblad 1043.
  6. Het Bitcoinstelsel is het gevolg van een meerpartijenovereenkomst. Wie een Bitcoinportemonnee heeft, bekleedt dus de hoedanigheid van houder van een contractueel recht jegens iedereen die zich verbindt tot de Bitcointoetredingsovereenkomst. Hij is gerechtigd om te verwachten dat die wederpartijen zijn bitcoins aanvaarden wanneer hij jegens één van hen een betalingsverplichting heeft, behalve in geval van een andersluidende afspraak. Dat is een schuldvordering om iets te doen (facere). Hij neemt tegelijkertijd een identieke verbintenis op zich, ten voordele van de andere gebruikers. De Bitcoingebruiker is door zijn toetreding met andere woorden schuldeiser (en schuldenaar) van schuldvorderingen jegens alle wederpartijen.” (Simon Geiregat, ‘Eigendom op bitcoins’ (2018) 81 Rechtskundig Weekblad 1043, para 18.)
  7. Caroline Lebon, Het goederenrechtelijk statuut van schuldvorderingen (PhD thesis, KU Leuven 2006) 240-254.
  8. Andreas M. Antonopoulos, Mastering Bitcoin: Programming the Open Blockchain (O’Reilly 2017) 119.

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