At cryptocurrency and fintech conferences, FT Alphaville often hears Bitcoin enthusiasts make the assertion that Bitcoin is superior to fiat currency because it eliminates debt from the monetary system.<\/span>
<\/span>But this, of course, is a fallacy.<\/span>
<\/span>Bitcoin may have the potential to create a fully-funded reserve system, but it certainly doesn\u2019t eliminate debt from any system.<\/span>
<\/span>At best, Bitcoin\u2019s public ledger records a transfer of digital access rights in the eyes of the clearing network. It does not, however, record or see the terms and conditions of that transfer.<\/span>
<\/span>Indeed, as far as the clearing network is concerned all it knows is that a transfer has occurred. Party A\u2019s wallet has been debited while party B\u2019s wallet has been credited.<\/span>
<\/span>This is something akin to witnessing a physical coin being passed from one hand to the other. Yet what the process doesn\u2019t do is log the conditionality of the transfer \u2014 which is still the subject of private agreement and contract law.<\/span>
<\/span>\u2026\u2026\u2026 [snipped a Soprano’s based loan sharking example]<\/span>
<\/span>As far as contract law is concerned, even if Satoshi Dice received the bitcoin in good faith from Soprano\u2019s debtor, Soprano himself (despite his unorthodox shake-down tactics) retains a right to seize his property back. And if they passed it on, he can pursue the next party. And so on. Especially since the bitcoin network makes it so easy to follow the trail due to the public nature of the ledger. Eventually, if the coin ends up with a high-value investor or institutional account whose identity is known to the system a formal claim can be made by means of the judicial system.<\/span>
<\/span>It\u2019s these sorts of preceding property claims that the bitcoin system not only fails to eliminate, but arguably empowers by making the paper trail so incredibly transparent. But to what degree is the law really on Tony Soprano\u2019s side when it comes to his claim? (And we\u2019re not referring to his violent retrieval methods, which obviously remain illegal.)<\/span>
<\/span>George K Fogg at law firm Perkins Coie has been thinking about the problem of past claims (or liens) on bitcoins for nearly 14 months now.<\/span>
<\/span>His conclusion: under the United States\u2019 UCC code (uniform commercial code) as long as bitcoins are treated as general intangibles, no high value investor can be sure that an angry Tony Soprano won\u2019t show up one day to claim that the bitcoins they thought they received in a completely unencumbered manner are actually his<\/span><\/b>. In fact, it\u2019s only if and when Tony Soprano publicly renounces his claim to the underlying bitcoin collateral he is owed that the bitcoins stand a chance of being treated as unencumbered. Until then, a hot potato claim risk exists for every future acquirer of Soprano\u2019s bitcoin.<\/span>
<\/span>Indeed, given the high volume of fraud and default in the bitcoin network, chances are most bitcoins have competing claims over them by now. Put another way, there are probably more people with legitimate claims over bitcoins than there are bitcoins. And if they can prove the trail, they can make a legal case for reclamation<\/span><\/b>.<\/span>
<\/span>\u2026\u2026\u2026<\/span>
<\/span>The irony of all this for anti-government minded Bitcoin investors is that it\u2019s only by transferring bitcoins into the established financial system that they can be sure to be protected from outstanding Tony Soprano claims on their bitcoin<\/span><\/b>.<\/span>
<\/span>As Fogg notes:<\/span><\/p>\nMy libertarian friends have a belief they have created something that is outside of any statutory governance, and my response is you have created something novel that can help in transferring value across borders but you can\u2019t pretend that the UCC doesn\u2019t exist and because it does exist it affects bitcoin. Bitcoin is governed by the UCC. You can be an ostrich and pretend that it\u2019s not covered by it, or you can address that it is in fact covered by the statute and find a way to solve the problem.<\/span><\/p><\/blockquote>\n<\/blockquote>\nWhat a surprise.<\/p>\n
A security is created by some libertarian idiot who thought that it could be used to leave our society for Galt’s Gulch.<\/p>\n
Not so much.<\/p>\n","protected":false},"excerpt":{"rendered":"
The good folks come up with yet another problem with Bitcoin, this one deriving from a complete lack of understanding of hundreds of jurisprudence. This could mean that if a Bitcoin holder has a claim against them, and makes a purchase or a money transfer with Bitcoin, whoever received the funds may be legally required …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1004,972,1003,985,982],"tags":[],"class_list":["post-183058","post","type-post","status-publish","format-standard","hentry","category-finance","category-justice","category-philosophy","category-regulation","category-stupid"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/183058"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=183058"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/183058\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=183058"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=183058"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=183058"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}