8. This is where your analysis falls down. Bitcoins do not fall into this category. The analogy with commodities is just that - an analogy. Bitcoins are not tangible (or even intangible) goods in the technical legal sense and cannot be the subject of a claim for wrongful interference or conversion. They are not subject to the rules set out above.
I challenge you to cite case law on this point, but you won't be able to because there has never existed before a decentralized intangible good. Satoshi invented it when he solved the Byzantine Generals problem (formerly a problem with no known solution since 1975).
The closest analogy (though not a very good one) is probably money "in" a bank account (which is actually a contractual right enforceable against the bank) . As you well know, a "bitcoin" is simply a notional unit reflecting a ledger balance on the blockchain controlled by a confidential private key. It is far removed from tangible property to which the nemo dat and common law tracing principles apply.
Not only is it not an analogy because legal tender is issued by a central authority, the future legal interpretation will be founded in the will of the majority.
https://bitcointalk.org/index.php?topic=434744.msg5497044#msg5497044That would be true if the general public agrees as they do with cash.
But the problem is cash is highly regulated and so grandmas don't just see their money go "
and poof it's gone" from their bank account or when exchanging dollars for euros without some restitution.
The majority of the population is not going to accept our ideal of unregulated, decentralized wild west.
And the government has the legal authority to apply the nemo dat principle of our common law system to Bitcoin, because it is not legal tender, it is not sufficiently regulated by the government, and it is traceable forever.
We either add very strong anonymity so that the traceability is rendered impotent, or we succumb to the will of majority.
This is democracy. If you
want to destroy democracy, then you must have anonymity. Period. That is all I am saying. It is fact.
9. This does not mean that the law will fail to recognise the rights of a bitcoin owner. The dichotomy is a false one. It is very likely (though not perhaps completely certain) that the law will recognise and protect the rights of a bitcoin owner in some way.
10. How exactly it will do so has yet to be worked out in any jurisdiction, as far as I am aware. However, the protection of the rights of a bitcoin owner is very likely - in a common law jurisdiction - to be based upon the recognition of some equitable claim (perhaps deriving from the confidential nature of the private key or perhaps based upon the recognition of bitcoins as a novel species of equitable property).
It will obviously be an equitable restitution that "benefits" all Bitcoin holders. Don't you know democracy is there in your best interest and protects you.
Thus there will likely be two components to a popular and "equitable" restitution:
I hope you know the courts have been seeded with leftists. In the USA at least, this will likely be decided in the NY courts where the "Club" is in complete control of the outcome.
It will not be equitable to tell the naive masses in huge numbers "
go fuck your butthurt self, your shit is gone". When your grandma loses her life savings, you too will likely start to bend your idealism towards the left.
Thus the Bitcoin millionaires will get raped and the Bitcoin middle class will get taxed into essentially a fiat system again.
Initially this might be done separately in separate jurisdictions. The chaos of this will cause the community to demand global unification. Thus Bitcoin without strong anonymity (as it stands now) is assisting the demand for global authority for governance and the dilution of national and local authority.
This is why I am reasonably certain that Satoshi was the NSA and Bitcoin was planted with this feature set and is being held at this feature set by the Bitcoin Foundation which is being controlled by powerful interest.
11. The significance of this is that equitable claims (of all kinds) are - unlike common law claims for wrongful interference with goods - subject to the rights of a bona fide purchaser without notice. The quotation from Lord Browne-Wilkinson's speech in the Islington LBC case is not some novel principle. It is a fundamental principle of English (and U.S) trusts law that has been established for centuries. It applies to all kinds of equitable claims, irrespective of the source of the equitable right.
The "bona fide purchaser without notice" can only exist if he is not also the victim.
And since "everyone" (in the eyes of the popular politics) will be stolen from eventually, "everyone" is both a bona fide purchaser without notice and a victim.
Thus doing nothing is not acceptable. Have you ever heard of a government which does nothing? If they did nothing, we would need governments. Governments always have to do something, so that we need them.
You are essentially asking a judge to rule that no one has any rights to restitution. No judge will stand for that concept.
12. This is why the buyer of bitcoins will not be subject to the rights of the original owner unless he has notice that the coins were stolen.
The judge will recognize that notice is either useless or implicit as all coins would have notice. The judge will recognize that to do something equitable will require collectivism. There is no other solution which is equitable.
What we want in our ideal is a system that is not equitable, because
we fundamentally understand that life is not equal. But that ideal of the Dark Enlightenment can only stand if we destroy democracy.
Do you think any judge is going to choose to destroy democracy? Ludicrous if you do.
13. For this purpose, "notice" has a specific technical meaning. It does not mean there was something about in the newspapers. It refers to the making of such inquiries as are reasonable in the circumstances.
14. Ultimately what counts as notice would be a question of fact in each case, measured against the legal test. Evidence of usual market practice will be relevant. In the context of a bitcoin purchase the Court would consider what inquiries (if any) a reasonable purchaser would make.
Obviously if all coins are tainted, notice is futile. So either the court does nothing and abandons equitable restitution since increased regulation (to reduce theft) is technically impossible, or the court applies a fair mechanism to charge the cost of theft to insurance so as to smooth out the losses so the pain is not acute in individual scenarios, since over time all individuals will eventually be subject to (the risk of) theft. The government sees insurance as a very helpful vehicle and doesn't understand that it incentivizes an increase in that which it insures against.
This aids in the commerce in one sense, because the majority has less fear to hold and transact. So the judge will see this as a very normal and equitable way to help better the situation.
It is possible that private insurance is developed to ward off the need for state restitution. Yet remember that private insurance always ends up backstopped by the government. Because as I pointed out, insurance increases the activity which it insures against, thus it is a bankrupting paradigm. Evidence is for example the end game of Hitler's universal heath care, the coming end game of ObamaCare and universal health care in Europe.
15. The answer to that is of course that a buyer from an exchange or market place does not make inquiries as to the provenance of the bitcoins he is purchasing and it is highly unlikely that he would be expected to, even were it technically possible to do so. Thus in all ordinary circumstances the buyer of bitcoins will take free of equitable claims.
That a buyer doesn't normally do tracing on Bitcoins doesn't mean the judge will rule the de facto norm is legally correct.
The judge is going to see Bitcoins are form of unregulated cash, and compare+contrast with legal tender, since that is the closest analogy. The judge will clearly see an intractable problem due to the inability to regulate against theft because of the technical nature of it being decentralized. He will see that legal tender has much protections against theft because it is not decentralized. Thus he will see that he can't practically apply nemo dat on an individual basis and he can't leave it unregulated
because that is lawlessness.
Unlike bearer instruments which are untraceable because they are physical (which is why they aren't popular, possessor beware applies because Grandmas don't use them), Bitcoins have this public ledger so everything is traceable. Thus it is empirically provable that all coins are eventually tainted. With legal tender this is true also, except the system is effectively able to regulate theft (well enough that Grandmas trust their money in bank accounts and exchanges). Yet with Bitcoins the only place that regulation can be applied is at the exchanges to/from fiat or the taxation of those who report Bitcoin income and/or capital gains.
Given those are only place to regulate, then the judge has to choose between lawlessness or applying the law at those choke points.
16. This does not mean that the original owner has no remedy. He will have a good personal claim against the thief (if he can find him).
The thieves are hackers and are almost never brought to justice. Thus it will become more and more popular to hack Bitcoins, especially as more naive Grandmas start using it. Thus you are asking the judge to defer to lawlessness. Grandmas versus hackers. Who do you think society will favor?
But the notion that the victim of a bitcoin theft will be able to bring an equitable tracing claim against any subsequent owner whose balance can be traced back to the theft, is thus false.
Thus for all usual cases, the premise of your original post is false.
You were thinking too-inside-a-box. See the broader, holistic analysis above.
My attorney father once remarked to me, "People are such linear thinkers, if A then B then C". Perhaps I inherited this out-of-the-box brain stem from him, although my mother is also a deep thinker.
