More and more people join the Bitcoin community every day. Thus, the drive to determine how it can integrate into mainstream society becomes even more essential. The questions that strike to everyone is whether any traditional laws apply to Bitcoin or not.
Although these determinations might bring implications to its holders and Bitcoin itself, and few will play a bigger role in the United States than property laws, which could ultimately govern ownership over the digital currency.
A new white paper “Treatment of Bitcoin Under U.S Property Law”, assembled by Perkins Coie. The report seeks to analyze how the worlds of virtual currency and property law intersect. Perkins Coie is an international law firm that specializes in blockchain technology and digital currency, also it has been active in space since 2013. It is pretty detailed and well researched but the paper’s conclusion is straightforward and transparent.
“We conclude that property interests should exist in Bitcoin under such law and that multiple sources of persuasive authority provide additional support for that conclusion,” the paper’s authors, J. Dax Hansen and Joshua L. Boehm, wrote.
The paper starts off with an overview of Bitcoin’s technological aspects and what those mean for how property law can apply to it. The authors use California state law and Bitcoin transactions as an example and make their case.
“Parties may … enter into contractual arrangements in which one party entrusts partial or complete control of such private key(s) to a third party while still maintaining formal title to the bitcoin value represented inapplicable [unspent transaction outputs],” the paper reads. “These kinds of contractual arrangements are commonplace in custodial, trust, and escrow settings, which have generated well-developed legal principles that should generally translate to bitcoin custodial contexts.”
Even the country’s superior law professors support the idea that intangible property rights should apply to Bitcoin:
“Property law scholars who have encountered the bitcoin ownership issues in the context of broader, more theoretical undertakings have reached the same general conclusion… that is, interests in bitcoin should be protected by property law.”
The author further describes how Bitcoin has been widely treated as property by legal divisions and thus can be owned as one.
“Although the concept of ‘property’ is fundamentally a matter of state law in the United States, it is also important that bitcoin has been widely treated as property for the purposes of other state and federal statutory regimes,” reads the paper. “These treatments and assumptions have already had substantial consequences for the bitcoin sector. They, therefore, constitute informal but persuasive legal precedent further indicating that bitcoin can be owned as property.”
The author also pointed out the challenges that would come along with treating the currency as legal property. These include the lack of traceability that comes with Bitcoin, the multisignature arrangements, and pseudo-anonymity. Although, the authors are still positive that these obstacles can be overcome as the technology evolves.
“To be sure, difficulties in tracing ownership of particular bitcoin units across successive owners could cause some challenges in certain commercial use cases,” they wrote, but “blockchain technology itself has enables, and will likely continue to enable, solutions to obstacles that do arise.”
It appears to be that the worlds of Bitcoin and formal legal precedent are rapidly coming to a head. This could be a turning point for Bitcoin’s future.