In some legal systems, a debtor has the right to discharge its debt by paying in a currency other than the currency of account (i.e. the currency in which the debt is denominated). This option is sometimes called the right of conversion. Thus, Article 403 of the Japanese Civil Code provides:
Where a debt is denominated in a foreign currency, the debtor may make the payment in the Japanese currency in accordance with the exchange rate of the place of payment.
Where a debt is denominated in a cryptocurrency, the question whether the debtor has the right of conversion may arise. To fully consider this question, the following issues would need to be addressed:
1. what is the rationale of the right of conversion;
2. whether cryptocurrencies should be equated with foreign currencies in this context; and
3. what should be the law governing the right of conversion (More specifically, whether it should be the law applicable to the debt or the law of the place of payment and, if it is the latter, where is the place of payment of cryptocurrencies).
A separate question is whether the creditor has the right to demand payment in a currency other than the currency of account. This question, too, could arise where the debt is denominated in a cryptocurrency.
I intend to discuss these issues in my future posts.
Where a debt is denominated in a foreign currency, the debtor may make the payment in the Japanese currency in accordance with the exchange rate of the place of payment.
Where a debt is denominated in a cryptocurrency, the question whether the debtor has the right of conversion may arise. To fully consider this question, the following issues would need to be addressed:
1. what is the rationale of the right of conversion;
2. whether cryptocurrencies should be equated with foreign currencies in this context; and
3. what should be the law governing the right of conversion (More specifically, whether it should be the law applicable to the debt or the law of the place of payment and, if it is the latter, where is the place of payment of cryptocurrencies).
A separate question is whether the creditor has the right to demand payment in a currency other than the currency of account. This question, too, could arise where the debt is denominated in a cryptocurrency.
I intend to discuss these issues in my future posts.
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