Regulation within the cryptocurrency community has been a hot button topic for years. Now some researchers are claiming a few countries’ property laws do not apply to digital assets, causing confusion regarding how they’d be handled by the courts.
I Thought I Was My Own Bank?
One of the most attractive qualities of Bitcoin and other cryptocurrencies is that they allow you to be in complete control of your own funds. Instead of giving your money to a bank and let them hold on to it for you, bitcoins can be stored very securely in your own home. Only you have the private key needed to spend the coins.
In that sense, you do own your coins. If ownership was defined by having control over an object, then you’d be golden.
However, bitcoins and other digital assets are an entirely new asset class that doesn’t exactly fit in our existing legal framework. In England and Wales, the law does not recognize the possession of intangible items. Meaning if you can’t hold it, you can’t own it.
Cryptocurrencies exist only on the blockchain, a public ledger that records everyone’s balances and transactions. So, while your coins are completely cryptographically secure, they are not protected from legal measures. But then again, could the government enforce you giving up your coins if you’re the only one with the private key?
Odd Asset-Class Out
Most legal systems split “real property,” such as land, and “personal property,” which includes everything else.
Within personal property, you have “things in possession.” These are the items you physically possess, such as the cash in your pocket. There’s also “things in action,” which are things claimed only using legal action, such as contractual obligations and intellectual property.
If you deposited that cash you had earlier in a bank, it would become a “thing in action” as the bank owes you a debt of $20. The debt isn’t tangible, you can’t “hold” a debt, but you can definitely get the courts involved if the bank doesn’t pay you back.
You can start to see how Bitcoin fits in this sort of gray area when it comes to property. You don’t really have possession of the coins, only the private key.
On top of that, having a bitcoin in your wallet does not give you any rights to move from any other party. Even purchasing tokens, which require a central token issuer, does not necessarily give you any rights as well.
Does Bitcoin Need the Law?
A significant amount of traffic on the early Bitcoin network performed by people who needed to send money anonymously, often for illegal purposes. It was heavily used on the darknet, most famously on the Silk Road.
When you pass away, all your real property is passed down to your heirs. With Bitcoin, however, the only way to move the coins is by using the private key. If you die without having written down your wallet password or seed, your family would never be able to access your coins. They’d stay in your wallet until the end of time.
That’s just one example, but there are dozens of problems that could arise when cryptocurrency meets legislation. The price volatility has attracted some investors and kept others away. However, many institutional investors have their eye on Bitcoin ever since the 2017 bull run. The lack of regulation and legal protection surrounding digital assets may be the very thing holding investors back.
Do you think we need more regulation in the cryptocurrency space, or less? Have you had any legal issues while using cryptocurrencies? Let us know in the comments below!
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