[2014-03-13] Is UCC Article 9 Going to Kill the Use of Bitcoin by US Businesses?

[runam0k]

Any US lawyers want to chime in?

http://www.nakedcapitalism.com/2014/03/ucc-article-9-going-kill-us-bitcoin-us-businesses.html

In short, bitcoins may not currently fall within the definition of "money" for the purposes are Art 9 of the Uniform Commercial Code, being a "medium of exchange currently authorized or adopted by a domestic or foreign government" (UCC § 1-201(b)(24)).

The upshot:

If anyone takes Bitcoins from a business that has a blanket lien (and you as someone dealing with that business won't know the state of their finances) and that business gets in trouble, the bank can go after any current holder of Bitcoins that have passed through that business' accounts

Absurd result, obviously.

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[meanig]

I think this nails the argument

There's been some misunderstanding here when it comes to bitcoins and property. Bitcoins are not property, they're cryptographically signed messages.

Suppose a bakery decides to accept bitcoins from a customer. The baker generates a private key and from that produces a bitcoin address. The customer scans the address and then sends a message to the Bitcoin network signed by one of his private keys saying that he wants to transact with the bakers address. The Bitcoin network verifies the message and the transaction is complete. 

Next lets say that the baker decides to pay a supplier using bitcoins. The baker sends a message signed by his private key to the Bitcoin network saying that he'd like to transact with the suppliers bitcoin address. The Bitcoin network verifies the message and the transaction is complete.

The private key which the baker generated to facilitate the transaction is still in his possession after paying the supplier. The private key is his property and the bank can make a lien on that if they want. They can't make a lien on the supplier because the private key used by the supplier to facilitate the trade was never the baker's property.

[meanig]

From her replies to the comments you could say that Yves Smith the author is an arrogant muttonhead with deluded pretensions of authority. She has no interest in learning how Bitcoin works and then shouts down arguments against her article by just saying "FinCEN said so". Yves Smith is in the same camp of deranged journalists as Leah McGrath Goodman. Journalism is in a sad sad situation. 


Yves Smith said

You are really behind on this issue. Go read our summary of FinCEN’s and the IRS’s position on this.

http://www.nakedcapitalism.com/2014/03/bitcoin-currency.html

The fact that people will trade goods with tangible value for Bitcoin means it is NOT just messages. It has been ascribed value, like collectable baseball cards, and hence is property. You can call it whatever you want, but don’t expect courts and the tax man to follow your views. There’s a well established legal and regulatory framework for commercial transactions, and it’s not as hard as you think to slot where Bitcoin fits in.

FinCEN, and the IRS is pretty sure to follow, regards Bitcoin as tradeable property. You don’t have a vote in this.

and

You clearly did not bother to read the post, so I don’t see why I should keep spoon feeding some who chooses to be obtuse. And your “literally just messages” is a further illustration. I could just as easily say, “An ebook is just messages” but people ascribe value to them, pay for them, hence they are property.

This was in the post:

Further, the security interest will remain with the bitcoins through subsequent transfers (UCC § 9-325). A remote transferee of the bitcoins will take the bitcoins subject to the bank’s security interest. Assuming the bank has taken the easy steps to perfect its security interest, which it almost always will have, the bank can seize the bitcoins as collateral if the bakery’s debt goes unpaid. The possibility of another party with superior property interest in a bitcoin would seem to substantially dampen their utility as a medium of exchange….

…consider the example of the bakery and the supplier. After the bank calls the bakery’s loan and gets a judgment against the bakery, it conducts discovery to see where the bakery’s bitcoins went. The bakery will be compelled to testify as to the identity of the supplier. Then the supplier will be compelled to testify as to the present contents of the supplier’s bitcoin account. If the supplier fraudulently transfers the coins before the bank can seize them, the supplier is liable to the bank — in real dollars

and

I said I didn’t see any point in indulging you further but you couldn’t take “no” for an answer, could you?. You’ve gone from possibly being thick-headed to making it clear you are a troll.

The private key is not the consideration. That’s like saying the license key is the software.

Go hire a UCC expert and educate yourself.

[Peter R]

From her replies to the comments you could say that Yves Smith the author is an arrogant muttonhead with deluded pretensions of authority. She has no interest in learning how Bitcoin works and then shouts down arguments against her article by just saying "FinCEN said so". Yves Smith is in the same camp of deranged journalists as Leah McGrath Goodman. Journalism is in a sad sad situation.  

She doesn't understand how bitcoin works.  I really think that before anyone can argue for or against bitcoin, they must have at least a loose understanding of (a) how digital signatures work (sign/verify), (b) how the peer-to-peer timestamp server (blockchain) works, (c) the abstract concept of a "coin" as a branching chain of digital signatures.  Many "arguments" against bitcoin would be quashed instantly if the arguer actually understood the basic concepts.    

Previously, Yves was one of my favourite economics writers and seemed to work on the side of freedom and fairness.  Now I'm disappointed by her logic-deprived campaign against bitcoin.  But I can't for the life of me figure out why she seems so negative on the idea.  It's like she is searching and searching for reasons why it won't work, rather than ever asking how it could work and make the world a better place too.    

[runam0k]

But I can't for the life of me figure out why she seems so negative on the idea.  It's like she is searching and searching for reasons why it won't work, rather than ever asking how it could work and make the world a better place too.

Quite a few econ journalists have reacted the same way.  Militant Keynesians, I guess, offended by something that calls into question their entire life's work and beliefs.

[Buffer Overflow]

But I can't for the life of me figure out why she seems so negative on the idea.  It's like she is searching and searching for reasons why it won't work, rather than ever asking how it could work and make the world a better place too.

Quite a few econ journalists have reacted the same way.  Militant Keynesians, I guess, offended by something that calls into question their entire life's work and beliefs.

Here's an excellent article why many economists are acting the way they are.

http://www.coindesk.com/bitcoin-changing-everything/

By their old-school economic mindset, bitcoin cannot exist. Should not exist. Must not exist.

But it does.... and it's growing.

[Peter R]

But I can't for the life of me figure out why she seems so negative on the idea.  It's like she is searching and searching for reasons why it won't work, rather than ever asking how it could work and make the world a better place too.

Quite a few econ journalists have reacted the same way.  Militant Keynesians, I guess, offended by something that calls into question their entire life's work and beliefs.

Here's an excellent article why many economists are acting the way they are.

http://www.coindesk.com/bitcoin-changing-everything/

By their old-school economic mindset, bitcoin cannot exist. Should not exist. Must not exist.

But it does.... and it's growing.

I agree that explains skepticism from many economists, but I'd hardly call Yves a Militant Keynesian.  Although to a lesser extent than Mish, and less again than Zerohedge, the impression I got was that she viewed most large banks as havens of fraud and abuse, and fractional-reserve banking as a detriment to society.

But we even see relentless attacks on bitcoin from many at Zerohedge--a group that is anti-Fed to the point of the fanatical!  The only way I can explain this behaviour is "dinosaurism":


One becomes a dinosaur when their hard-wired brain no longer sees it as possible for the status quo to ever *really* change.

When Einstein published his ‘theory of relativity’ as a young man, it was met with much doubt and criticism by his seniors. But it wasn’t that these more experienced physicists eventually came to realize that he was right. No, these older physicists died off leaving behind the younger generation that was less blind to the truth.

Einstein became a dinosaur too in his old age, doubting modern theories in quantum mechanics.

We all eventually become dinosaurs, as the leadership in thought falls upon the younger generation who continue to fight for truth and progress.

[Bit_Happy]

But I can't for the life of me figure out why she seems so negative on the idea.  It's like she is searching and searching for reasons why it won't work, rather than ever asking how it could work and make the world a better place too.

Quite a few econ journalists have reacted the same way.  Militant Keynesians, I guess, offended by something that calls into question their entire life's work and beliefs.

Here's an excellent article why many economists are acting the way they are.

http://www.coindesk.com/bitcoin-changing-everything/

By their old-school economic mindset, bitcoin cannot exist. Should not exist. Must not exist.

But it does.... and it's growing.

This is because bitcoin as a technology isn’t just challenging business models, or even an entire industry. Plenty of innovative outfits do that with much less flare. Bitcoin is challenging the financial infrastructure of the whole global economy, and even more, it is challenging entire generations of established political and economic theory that that infrastructure is built on.

Bitcoin’s exponential growth flouts all of the traditional monetary theory that is the mainstream ideology amongst academics and politicians today. Its very existence and growing success cannot be accounted for within these old paradigms.

It challenges not only the basis and underlying assumptions of the modern financial system, but calls into question the beliefs and even livelihood of so many politicians, economic advisors, and media pundits. That is why so many are so sceptical of it, and others even outright hostile.


So glad to be a part of this...