Technology and Taxonomy for Lawyers — a part of the book Digital Assets Law in Singapore and Switzerland by Dr Alexander Ressos.
Technology and Taxonomy for Lawyers: a part of the book Digital Assets Law in Singapore and Switzerland by Dr Alexander Ressos.
This part belongs to Digital Assets Law in Singapore and Switzerland by Dr Alexander Ressos, published here in full, section by section.
Technology and Taxonomy for Lawyers
A lawyer who advises on digital assets does not need to write code. She does need to know, with precision, which technical fact produces which legal consequence. Read more Singapore · TechnologyThe ledger as a shared record
A distributed ledger is a database that many independent computers hold in identical copies and update by agreement. Nothing in that description is new. Read more Singapore · TechnologyBlocks, hashes and immutability
Transactions are grouped into blocks. Each block carries a cryptographic hash of the preceding block, which is a fixed-length fingerprint computed from the block's entire content. Read more Singapore · TechnologyPublic and private keys
Every account on a distributed ledger is controlled by a key pair. The private key is a very large random number. The public key is derived from it by a one-way mathematical function. Read more Singapore · TechnologyAddresses and pseudonymity
An address is a string of letters and digits. It carries no name. Anyone can generate as many addresses as he wishes at no cost. Read more Singapore · TechnologyUTXO and account models
Bitcoin tracks value as unspent transaction outputs (UTXOs). Each output is a discrete lump of value locked to a condition, usually a public key. Read more Singapore · TechnologyConsensus mechanisms
Consensus is the procedure by which the participants settle on the next block. Two families dominate. Read more Singapore · TechnologyFinality and settlement
Finality is the point after which a transaction cannot be reversed by the protocol's own rules. Bitcoin offers probabilistic finality. Read more Singapore · TechnologySmart contracts
A smart contract is a programme stored on the ledger that executes when a transaction calls it. The word "contract" was chosen by Nick Szabo in 1994 and has misled lawyers ever since. Read more Singapore · TechnologyForks
A fork occurs when the network's participants cease to agree on a single history. A soft fork tightens the rules in a way older software still accepts. Read more Singapore · TechnologyLayer-2 networks
A layer-2 network processes transactions off the main chain and periodically posts a compressed record to it. Read more Singapore · TechnologyBridges and wrapped assets
A bridge is a mechanism that lets a token on one chain be represented on another. Read more Singapore · TechnologyOracles
An oracle feeds external information to a smart contract. Price oracles tell a lending protocol what collateral is worth, so that it can liquidate under-collateralised positions. Read more Singapore · TechnologyPutting it together: reading a transaction
Before giving any opinion on a token, obtain and record the following from a block explorer or the client's technical team: - The network and, if applicable, the layer-2 on which the token lives. -… Read more Singapore · TechnologyWhy custody is the central question
Most of the legal risk in digital assets concentrates at one point: who holds the private key, and on what terms. Regulation in both hubs is organised around that point. Read more Singapore · TechnologySelf-custody
Self-custody means the holder controls the private key without an intermediary. Read more Singapore · TechnologyCustodial holding: the omnibus wallet
In an omnibus model the custodian holds all client tokens in one or a few addresses that it controls. Read more Singapore · TechnologySegregated wallets
In a segregated model each client has her own on-chain address controlled by the custodian. The chain itself shows the client's balance, although the custodian holds the key. Read more Singapore · TechnologyHot, cold and the key-management spectrum
The hot/cold distinction concerns connectivity. A hot wallet's key is on a system connected to the internet and can sign at once. Read more Singapore · TechnologyMulti-party computation and multi-signature
Two technologies have replaced the single private key in institutional custody. Multi-signature (multisig) is a feature of the ledger itself. Read more Singapore · TechnologyStaking custody
Staking means committing tokens to a proof-of-stake network to earn validation rewards. Four models exist. In solo staking the holder runs her own validator with her own keys and bears all risk. Read more Singapore · TechnologyLending, rehypothecation and the end of custody
Custody ends where lending begins. A custodian that may use client tokens for its own account, lend them to third parties or pledge them, holds a debt to the client and not the client's asset. Read more Singapore · TechnologyWhat "control" means legally
The chapter has used "control" in several senses, and it is worth separating them before the taxonomies of Chapter III rely on the word. Read more Singapore · TechnologyThe private key in insolvency: the only fact that matters
A Singapore exchange with a Swiss subsidiary fails in 2026. Read more Singapore · TechnologyWhy classification comes first
Every regulatory question in this book begins with a classification. Is the token a security, a payment instrument, a claim on money, a right to use a service, or none of these? Read more Singapore · TechnologyThe FINMA taxonomy
FINMA published its ICO Guidelines on 16 February 2018 and has not withdrawn them. Read more Singapore · TechnologyThe Singapore taxonomy
Singapore classifies by statute, with MAS guidance filling the gaps. Four categories carry legal weight. Read more Singapore · TechnologyThe MiCA taxonomy
Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA) has applied to stablecoins since 30 June 2024 and to other crypto-assets and service providers since 30 December 2024. Read more Singapore · TechnologyThe problem cases
The three taxonomies agree on Bitcoin, on a tokenised share and on a dollar stablecoin. They were written for those cases. Read more Singapore · TechnologyClassification in practice: a decision sequence
Apply the following steps, in order, to any token and record the answer to each: 1. Does the holder have a claim against any identifiable person? If yes, go to step 2. Read more Singapore · TechnologyThe redemption promise as the legal core
A stablecoin is a token designed to hold a constant value against a reference, almost always a fiat currency and overwhelmingly the US dollar. Read more Singapore · TechnologyFiat-backed stablecoins
In the dominant model an issuer holds reserves of fiat currency and short-dated government securities and issues tokens against them one for one. Read more Singapore · TechnologyCrypto-backed stablecoins
A crypto-backed stablecoin is issued by a protocol against over-collateralised deposits of other crypto assets. MakerDAO's DAI, now rebranded as USDS under the Sky protocol, is the leading example. Read more Singapore · TechnologyAlgorithmic stablecoins
An algorithmic stablecoin maintains its peg through a mechanism that expands and contracts supply in response to price, with little or no collateral. Read more Singapore · TechnologyTokenised deposits
A tokenised deposit is a bank deposit recorded on a distributed ledger instead of the bank's core banking system. Read more Singapore · TechnologyCentral bank digital currency
A central bank digital currency (CBDC) is a liability of the central bank in token form. Two varieties exist. Read more Singapore · TechnologyPurpose-bound money
Purpose-bound money (PBM) is a Singapore design concept, published by MAS in a white paper of June 2023, under which a digital money token is wrapped in a programmable layer that restricts how,… Read more Singapore · TechnologySwiss franc stablecoins
The Swiss franc stablecoin market has remained small because of the regulatory constraints described above. Three designs have been tried. Read more Singapore · TechnologySingapore dollar stablecoins
Singapore's dollar stablecoin market is dominated by StraitsX's XSGD, issued since 2020 by a company holding an MPI licence for e-money issuance and DPT services, and by Paxos Digital Singapore's… Read more Singapore · TechnologySanctions, freezing and the technical reality of the promise
Every major fiat-backed stablecoin contract contains functions that let the issuer freeze or destroy tokens at specified addresses. Read more Singapore · TechnologyTwo meanings of tokenisation
"Tokenisation" describes two quite different operations. Most confusion in the field comes from failing to separate them. In the first, the ledger is the register. Read more Singapore · TechnologyThe ledger as register: ledger-based securities
Switzerland is the only jurisdiction covered by this book that allows the ledger to be the register for securities as a matter of general law. Read more Singapore · TechnologyThe ledger as record: the digital twin
In the second model the token is a digital twin of an asset held elsewhere. A gold token represents gold bars in a vault. A tokenised fund unit represents a unit recorded in the fund's register. Read more Singapore · TechnologyTokenised securities
Tokenised bonds have been the most active segment in both hubs. Read more Singapore · TechnologyTokenised real estate
Real estate cannot be tokenised directly in either hub. Title passes by registration in the land register, which neither country has connected to any distributed ledger. Read more Singapore · TechnologyTokenised commodities and art
A gold token is a claim against the issuer for delivery of gold, or a representation of a share in gold the issuer holds. Read more Singapore · TechnologyPrivate credit and receivables
Tokenised private credit, in which loans to businesses are originated, funded and serviced through tokens, grew rapidly in 2024 and 2025 through protocols such as Centrifuge, Maple and Goldfinch and… Read more Singapore · TechnologyThe ledger as register and the ledger as record: a decision sequence
For any tokenised real-world asset, record the following before advising on it: - The asset and the register that establishes title to it under the law of its location. - Whether the token is the… Read more Singapore · TechnologyWhat DeFi is and why the law struggles with it
Decentralised finance (DeFi) is the collective name for financial services delivered by smart contracts on public ledgers without an intermediary holding customer assets. Read more Singapore · TechnologyAutomated market makers
A decentralised exchange of the traditional kind would need an order book and a matching engine. Automated market makers (AMMs) dispense with both. Read more Singapore · TechnologyLending protocols
Aave and Compound, the leading lending protocols, hold pools of tokens deposited by lenders and allow borrowers to draw against collateral they deposit. Read more Singapore · TechnologyLiquid staking
Chapter II introduced staking and Chapter III classified the receipt tokens. Read more Singapore · TechnologyRestaking
Restaking, introduced by EigenLayer in 2023 and 2024, allows staked ETH or liquid staking tokens to be committed as security to additional services (oracles, bridges, data layers) that need economic… Read more Singapore · TechnologyPerpetual futures and derivatives
Perpetual futures (perps) are the dominant derivative in crypto markets. Read more Singapore · TechnologyBridges as DeFi infrastructure
Chapter I described bridges technically. In the DeFi context they are the point of greatest loss. Read more Singapore · TechnologyWho is the counterparty: the legal person behind the protocol
The preceding sections have repeatedly asked who the counterparty is. The question can be approached systematically. Every DeFi protocol has some combination of the following persons connected to it. Read more Singapore · TechnologyThe Federal Council's 2022 position
The Federal Council published its report on decentralised finance on 16 December 2022 in response to a parliamentary postulate. Read more Singapore · TechnologyMAS's stance
MAS has never published a DeFi report comparable to the Federal Council's, but its position can be assembled from speeches, consultation papers and the design of the DTSP regime. Read more Singapore · TechnologyEnforcement reality
Neither regulator has brought an enforcement action against a DeFi protocol as such. Both have acted against identifiable operators. Read more Singapore · TechnologyWhat a DAO is
A decentralised autonomous organisation (DAO) is a group of persons who coordinate through smart contracts and govern a shared treasury or protocol by voting with tokens. Read more Singapore · TechnologyThe legal nature of a DAO under Swiss law
Swiss law has no DAO statute. Read more Singapore · TechnologyThe legal nature of a DAO under Singapore law
Singapore's common law reaches a similar default by a different route. Read more Singapore · TechnologyThe Swiss foundation
The analysis above explains why no serious protocol operates an unwrapped DAO. The core team's advisers will have told them that they are personally liable for everything the DAO does. Read more Singapore · TechnologyThe Swiss association
The association (Verein) under Art. 60 ff. CC has become the second Swiss wrapper and in some respects a better one for DAOs. An association has members, who may be the token holders. Read more Singapore · TechnologySingapore's company limited by guarantee
Singapore has neither a foundation nor an association with legal personality in the Swiss sense. Read more Singapore · TechnologyLiability of token holders
Protocol teams also use the Cayman Islands foundation company, the Marshall Islands DAO LLC, the Wyoming DAO LLC and the Liechtenstein foundation. Each has advantages. Read more Singapore · TechnologyTreasury control
A DAO's treasury is the assets the community governs. It may be held in a smart contract that executes votes automatically, in a multisig controlled by a committee, or by a legal wrapper. Read more Singapore · TechnologyWhere the hubs stand in 2026
Switzerland has, through the foundation and the association, the most developed practice in the world for giving protocols a legal home. Read more Singapore · TechnologyGlossary of technical terms used in this book
The following entries define the technical terms used throughout the book in the sense in which the book uses them, in alphabetical order. Read more