[2018-11-24] You may not actually own your Bitcoin - legal expert

[bbc.reporter]

What does this convey for money laundering, ICOs or anything where bitcoin and other cryptocoins are used illegally as defined by the government? Does this also imply that securities laws on ICOs are unenforceable? What are the regulators pursuing if the pursued did not issue or own anything that can be legally defined as real property?



The price of Bitcoin has dropped by 75% in the past year, so anyone who invested heavily at the peak will have lost a lot of money. And now there’s more bad news for crypto-currency investors to worry about: they may not legally own the digital assets they have purchased.

My colleagues and I have recently completed research showing that courts in England and Wales are unlikely to identify digital tokens as property, since the law does not recognise possession of intangible items. This means that crypto-currency holdings may not qualify as property at all. As a result, although digital tokens are technically secured through blockchain technology, the level of legal protection is unclear. And the same likely applies in other common law jurisdictions such as the United States, Hong Kong, Singapore, and most of India.

Property law deals with the rights you have over the things you own. Common law systems distinguish between land, called “real property”, and all other property, called “personal property”.

Personal property includes rights over two categories of things. First, there are “things in possession”. These are tangible items which you can physically possess and transfer to another. The £20 note in your pocket is a thing in possession.

Second, there are “things in action”, a mixed category of rights that can only be claimed or enforced by legal action. This includes debts, rights under contract, and intellectual property. The £20 you have deposited at a bank is a thing in action, because the bank owes you a debt of £20. That debt is intangible, but, if necessary, could be enforced through legal action.

So what about digital tokens such as crypto-currencies? Tokens don’t physically exist. They are entries on a virtual ledger. And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession.

Read in full http://theconversation.com/you-may-not-actually-own-your-bitcoin-legal-expert-107307

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[squatter]

What does this convey for money laundering, ICOs or anything where bitcoin and other cryptocoins are used illegally as defined by the government? Does this also imply that securities laws on ICOs are unenforceable? What are the regulators pursuing if the pursued did not issue or own anything that can be legally defined as real property?

We don't know if their legal analysis is correct. The authors also claim the analysis likely applies in jurisdictions other than England and Wales but they aren't actually sure. We should probably take this with a grain of salt.

I'm not very familiar with legal matters outside the US. But in the US, federal judges have already ruled that Bitcoin is money, and I don't think that's been challenged. Under US securities laws, I'm not sure that a security needs to be tangible property, so this analysis may not apply at all. Even if the law doesn't assert that digital tokens can be possessed, whether ICO tokens are issued or whether they're securities is another question.

The US courts and the SEC, IRS and CFTC all seem to believe cryptocurrencies fall under their jurisdiction.

[Carlton Banks]

Second, there are “things in action”, a mixed category of rights that can only be claimed or enforced by legal action. This includes debts, rights under contract, and intellectual property. The £20 you have deposited at a bank is a thing in action, because the bank owes you a debt of £20. That debt is intangible, but, if necessary, could be enforced through legal action.

So what about digital tokens such as crypto-currencies? Tokens don’t physically exist. They are entries on a virtual ledger. And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession

Well, that case law precedent doesn't sound very safe in the age of all digital assets. If cryptocurrencies don't exist and are hence impossible to legally possess, then neither do website authenticatation certificates, which exist in the exact same way as cryptocurrencies do: cryptographic keys.

I'm not surprised lawyers are attacking cryptographic tech, as it's a threat to their notarising business. Someone should remind these hot-shot lawyers of possibly one of the oldest legal maxims; possession is 9/10ths of the law. For cryptographic keys, it's the whole of the law, all 10/10ths. If someone refuses to give up the keys to a well-secured cryptographic secret, lawyers or whoever else can talk as much as they like about it, their so-called laws are powerless to reveal the key. Maybe they can waste some time and money doing a test case to discover the obvious truth of the matter.

[odolvlobo]

It's irrelevant. Cryptocurrencies don't depend on laws to determine ownership. They depend on math. Though I suppose it could even be helpful, as a government could not then compel you to hand over something that you don't legally possess.

[hatshepsut93]

It's irrelevant. Cryptocurrencies don't depend on laws to determine ownership. They depend on math. Though I suppose it could even be helpful, as a government could not then compel you to hand over something that you don't legally possess.

They depend not only on the math, but also on the free market, and free market doesn't care about the government. Millions of people who spend and accept Bitcoin don't care what their governments say about Bitcoin and what's its legal status, they do it because it has value for them. These people wouldn't care if they won't get governments protection, because they don't trust their government already and try to rely only on themselves.

[bbc.reporter]

Second, there are “things in action”, a mixed category of rights that can only be claimed or enforced by legal action. This includes debts, rights under contract, and intellectual property. The £20 you have deposited at a bank is a thing in action, because the bank owes you a debt of £20. That debt is intangible, but, if necessary, could be enforced through legal action.

So what about digital tokens such as crypto-currencies? Tokens don’t physically exist. They are entries on a virtual ledger. And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession

Well, that case law precedent doesn't sound very safe in the age of all digital assets. If cryptocurrencies don't exist and are hence impossible to legally possess, then neither do website authenticatation certificates, which exist in the exact same way as cryptocurrencies do: cryptographic keys.

I'm not surprised lawyers are attacking cryptographic tech, as it's a threat to their notarising business. Someone should remind these hot-shot lawyers of possibly one of the oldest legal maxims; possession is 9/10ths of the law. For cryptographic keys, it's the whole of the law, all 10/10ths. If someone refuses to give up the keys to a well-secured cryptographic secret, lawyers or whoever else can talk as much as they like about it, their so-called laws are powerless to reveal the key. Maybe they can waste some time and money doing a test case to discover the obvious truth of the matter.

What would that precedent suggest on holding private keys and using that as ownership of assets represented in a digital ledger? Does it also set a precedent that a bitcoin money launderer did not technically do money laudering because he used bitcoin?

An ICO might have not broken any laws hehehe.

[figmentofmyass]

What would that precedent suggest on holding private keys and using that as ownership of assets represented in a digital ledger? Does it also set a precedent that a bitcoin money launderer did not technically do money laudering because he used bitcoin?

An ICO might have not broken any laws hehehe.

it probably doesn't have any bearing on money laundering or securities laws. this pertains to whether personal property rights are applicable to bitcoin and enforceable through the courts. the issue is about legal protections, ie property rights. just because bitcoins are not "things in possession" doesn't make money laundering with them legal. money laundering laws pertain to engaging in transactions using criminal proceeds with the intention to conceal the source of funds. it doesn't matter what kind of asset is used.

[DooMAD]

Pffft.  I don't need lawyers, courts or governments to acknowledge my ownership.  That's what the blockchain is for.  It's kinda the whole point.

[KryptoKai]

This is a very good point, there is no document to prove you actually own anything on the blockchain other than a password that gives you access to x amount of bitcoin. We should not be taxed or blocked from any kind of bitcoin transactions

[darkangel11]

And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession.

So, according to the English law nobody is the owner of their domain, website, email address, digital pictures, articles written in the web, blogs, vlogs, streams, and so on.
Yet, somehow, they're being paid for them and they are paying others to "own" them. Does that mean they are unlawfully demanding money for the above and may be forced to give it back, because they never owned these things in the first place? This is getting more ridiculous by the minute.

[DooMAD]

So, according to the English law nobody is the owner of their domain, website, email address, digital pictures, articles written in the web, blogs, vlogs, streams, and so on.

That part was covered under 'Intellectual Property', as it naturally covers things like brand names and copyright:

Second, there are “things in action”, a mixed category of rights that can only be claimed or enforced by legal action. This includes debts, rights under contract, and intellectual property.

[darkangel11]

So, according to the English law nobody is the owner of their domain, website, email address, digital pictures, articles written in the web, blogs, vlogs, streams, and so on.

That part was covered under 'Intellectual Property', as it naturally covers things like brand names and copyright:

Second, there are “things in action”, a mixed category of rights that can only be claimed or enforced by legal action. This includes debts, rights under contract, and intellectual property.

Does that mean that everything that I've listed, like pictures, videos, domain names, emails, websites, programs (even freeware) are intellectual properties, but Bitcoin is nothing? How come porn can be considered "intellectual" property, and program created by an anonymous person not be?  I'm not directing this question towards you, I'm just amazed by how these lawyers see things.

[timerland]

Obviously as you say, if a court doesn't recognize that bitcoin is legal property that is owned by someone, then there will be serious issues as to persecuting someone for money laundering and other crimes that are done through bitcoin, and could seriously open up loopholes for criminals.

As a result, I think that most countries will start to accept that bitcoin is legal, private property sooner or later.

We've even seen this in China where the court in Shenzhen had recently ruled that owning bitcoin is legal, as it is owning private property.

It's irrelevant. Cryptocurrencies don't depend on laws to determine ownership. They depend on math. Though I suppose it could even be helpful, as a government could not then compel you to hand over something that you don't legally possess.

I'd definitely agree with you mostly, except in the case of stolen bitcoins or whatnot, or companies running fraudulent investments that are quite common, would they be incriminated at all given if bitcoin is not recognized legally? But as you say, the transaction making and storage of bitcoin itself is secured by the blockchain, it's separate from the legal system.

[Carlton Banks]

As a result, I think that most countries will start to accept that bitcoin is legal, private property sooner or later.

Maybe

Cryptography scares the shit out of corporations, governments and institutions everywhere. Cryptography, when used by individuals, is a very powerful tool for securing one's rights, rights that are presently protected by the 3 aforementioned entities. The powerful entities in the first sentence I wrote don't want less power or less relevance, and so they're literally desperate to make sure crypto systems for individuals are designed and centrally administered by them.

This goes all the way back to encrypted email tech in 1992; US gov tried to stop people using crypto tech that they as an individual could control on their own, and they threw almost everything they had at it (this backfired hilariously, US gov claimed email encryption was "weapons grade technology" and therefore subject to export control. There were legal rulings, and the US gov lost).

This is a real moment in history here. There will be those that stand up for the rights that crypto tech bestows them. And those that bend over. I will be standing.

[DooMAD]

The title of the article should actually be:

"Legal experts yet to realise they're being replaced with smart contracts and blockchains"

I'm betting a large proportion of their business model will be totally obsolete within 20 years.  We simply won't need them to defend the ownership of things.  For anyone currently studying to become a Notary, you may wish to consider a new career path, because the future of your business sector is on pretty shaky ground right now.  Just more pointless middlemen being cut out. 

[Bit_Happy]

As a result, I think that most countries will start to accept that bitcoin is legal, private property sooner or later.

Maybe

Cryptography scares the shit out of corporations, governments and institutions everywhere. Cryptography, when used by individuals, is a very powerful tool for securing one's rights, rights that are presently protected by the 3 aforementioned entities. The powerful entities in the first sentence I wrote don't want less power or less relevance, and so they're literally desperate to make sure crypto systems for individuals are designed and centrally administered by them.

This goes all the way back to encrypted email tech in 1992; US gov tried to stop people using crypto tech that they as an individual could control on their own, and they threw almost everything they had at it (this backfired hilariously, US gov claimed email encryption was "weapons grade technology" and therefore subject to export control. There were legal rulings, and the US gov lost).

This is a real moment in history here. There will be those that stand up for the rights that crypto tech bestows them. And those that bend over. I will be standing.

US gov claimed email encryption was "weapons grade technology" and therefore subject to export control...
A good lesson from history, Carlton. Less than 4 years ago, I saw at least two Open Source projects (still) intentionally using offshore servers, simply because their programs used modern encryption which was previously viewed as  "weapons grade technology".


You may not actually own your Bitcoin...
I agree with the independent voices already heard in this thread, ...Pffft.

[jademaxxiss012]

Actually I do not consider cryptocurrency as a property or an asset because it is indeed an intangible like those countries that define cryptocurrency not a property. Cryptocurrency is for decentralized payment system and could also be used as a medium of exchange for buying needs and wants of an individual or users. The only thing that differs cryptocurrency with the fiat money is that its value is being determine by the demand and supply of the coin/tokens.

[squatter]

Obviously as you say, if a court doesn't recognize that bitcoin is legal property that is owned by someone, then there will be serious issues as to persecuting someone for money laundering and other crimes that are done through bitcoin, and could seriously open up loopholes for criminals.

With regard to American law and probably others as well, that's not true. The federal money laundering statutes don't specify that instruments used for laundering must be "personal property." I wouldn't assume this opens up many loopholes in terms of criminal law. The legal protections the authors are talking about are matters of civil law -- tort law and such.