Digital Possession of Bitcoin - 9/10ths of the Law?
This is the first article in a series I am working on exploring legal issues around cryptocurrencies. There will be more questions in these posts than answers If you have questions you would like me to explore, please leave them in the comments.
No information in this article should be interpreted as legal advice. Laws vary between jurisdictions and are fact dependent. Please consult a qualified lawyer in your jurisdiction to answer specific questions about your situation.
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I bought my first Bitcoin a number of months ago and once I had done a transaction or two between wallets I was struck with a question. What the hell do I actually have? It's not an asset I can touch, nor can is there any attachment of my name to the holdings (except for perhaps at the exchange which we will ignore here). So what the hell do I have and how do I know I have it?
These may seem like silly questions to the crypto savvy, but they are fundamental questions that numerous other legal issues will be impacted by. It is worth exploring exactly how a person comes to own anything, including Bitcoin.
Possession vs Ownership
There are two distinct types of legal statuses that need to be explored: possession and ownership. I’ll be exploring Ownership in my next post. Possession are ownership are distinct states but can occur simultaneously. For example, if my brother loans me his car to do some moving, I will have possession of the vehicle but he will remain the owner.
Possession - refers to an individuals “care and control over a thing”. This means of I am holding something on my person or I am caring for or storing an asset, I have possession over that asset.
If you watch quality TV shows like COPS, you will see lots of suspects say that the stolen car they are driving or drugs they have in the car “are a friend’s”. This doesn't really change the fact that at the time of the search they possessed those items because they had care and control over them.
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There is a whole criminal area of law around how far away from a person drugs need to be before they are no longer in the care and control of an individual. Does a person driving have control over something in the trunk?
Its important to note that multiple individuals can have possession of a thing simultaneously if each of them have care and control.
Possession and Bitcoin - this connection seems quite obvious. A person would certainly have care and control over their Bitcoin if they have access to the private key that allows you to transfer the currency.
This means that anyone who has access to a private key may determined to be in possession of it. This may even include third parties who have access to your private key. This includes exchanges, online wallets and even locally saved wallets. If a person or corporation has access to the private keys they may be found to be in possession of them.
If you use a hardware wallet, it can be easy to forget that any Bitcoin stored on it are actually not on the wallet. The Bitcoin is always stored in the transactions on the blockchain; only the private keys are stored on the wallet.
Here is an interesting question then: if my brother gives me a hardware wallet but not the passwords to access it or the private keys inside, do I have possession of the currency?
This may begin to matter more and more if governments crack down on illegal Bitcoin transactions or money laundering. Would they be able to go after the people who carried hardware wallets or only those who have access to the private keys?
The question of possession seems like it is most important in criminal cases, where possession of some item is against the law. Ownership is more important when it comes to issues like exchanges, ICOs, and taxes. If you are interested in those issues, stay tuned for follow up articles every few days!
hmmm, this is quite amazing, am just trying to compare the two now and i realise that the only thing we can say we have onwership of is the keys, while the bitcoin in our wallets are in our possessions, meaning that if a third party lay holds on our keys and passwords, they autamatically becomes possession of it.
That's correct, the possession could also be widespread. If one person in New York and another in LA both have access to the private key, they may be found to be both in possession simultaneously, despite the distance.
Ownership is actually a different issue, which we will discuss next article.
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great questions!
I will keep the look out for the continuation...
Great article! Just out of curiosity... how familiar are you with Indigenous Law in Canada... I am thinking of setting up a cryptocurrency exchange on my Indian reserve and claiming that jurisdiction wise, because no Treaty has yet been signed with my First Nation and the Crown, that the Province would not have legal standing to stop us. I have some other thoughts along those lines... Like my wondering about the use of ICOs to fund /invest in class action lawsuits against Corporations or the Crown for violating their feduciary obligations to Native peoples.... Glad to see you here on Steemit. I've followed you and look forward to more of your posts.
Not enough to give you advice on a question like that. I assume you are in BC based off of the question.
My gut is that if you go through the same process as setting up any other corporation it would not operate differently than that. Either way, you should talk to a lawyer who works in this area.
If you private message me on Twitter, I may be able to recommend one.
What if several people hold the private key or part of it? And what on top is if someone holds the pin of a wallet but the wallet is with someone else and the key savely stored with a notary?
It is possible for no one to have possession of an item, which is a major distinction from ownership. If a bike is left alone in an open field then no one has possession of it until someone comes and takes it i.e. exerts their care and control over it.
My gut tells me that if a key were split into several parts, each of which was unstable on its own, then the holders of those parts are not in possession of the key.
If you have the pin but not the wallet itself, I don't see how you could be found to have possession as you cannot actually move funds around (no care and control). Having the pin may be an indicator of ownership however, as we will look at next post.
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Good questions @Klasta made me follow you right away! 😂
Will be #upvoting and #resteeming your posts soon!
#Happy #Thanksgiving to you and yours from #Alaska!
Hey just to let you know it was nice meeting you on PAL! To use the upvote room you have to make sure the post is older than 20 minutes next time, cheers!
Got it! Thanks for the support!
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