Over the past year the price of bitcoin is down 75%, and therefore, anyone who invested heavily at the peak prices in December last year, lost a lot of money. Think for cryptocurrency investors now have one more bad news: it is possible that legally they can’t own those digital assets that are acquired.
Recently, a group of British researchers came to the conclusion that the courts in England and Wales are unlikely to identify tokens as digital property, because the law in principle does not recognize the possession of intangible items. This means that cryptocurrency savings do not qualify as property at all. Despite the fact that the protection of digital tokens is provided by the blockchain technology, unclear the level of legal protection. And the same likely applies to other common law jurisdictions — the United States, Hong Kong, Singapore and most parts of India.
The definition of ownership
The property act applies to rights to things owned by people. The common law distinction between the land called “real estate”, and all other property, which is called the “personal property”.
Personal property includes rights to two categories of things. First, there are “things in possession”. It material that a person may physically possess and pass on to others. For example, the banknote of 20 pounds in the pocket of a man is a “thing of possession”.
Second, there are “things rightfully claims” — i.e., mixed category of rights that may be claimed or recovered only through legal process. They can include debts, rights under contract and intellectual property. 20 pounds that people put in the Bank is a “thing rightly demands”, because the Bank should issue him a debt of 20 pounds. The debt is intangible, but, if necessary, it can be collected in a judicial order.
So how about a digital token or cryptocurrency? Tokens do not physically exist. This is the only entry in the virtual registry. And case law of England and Wales found that thing that exists only in electronic form, cannot be the subject of ownership. Thus, the digital token is not a “thing in possession”.
However, the digital tokens do not like “things rightly demands.” Bitcoin does not give the holder the right to anything (or against anyone). The owner has a cryptographic private key (kind of password, secret numbers), which gives him exclusive control over the bitcoin. This allows you to send transactions in bitcoin through the registry to where he wants.
Other token types in reality give you the right to act against the Issuer of these tokens (e.g., in court). For example, useful tokens provide the right product or service of the company. These tokens actually represent a debt obligation of the Issuer or the right under the contract and, most likely, will be considered valid in court. However, not all tokens give buyers the right to act against issuers. The terms of the recent sale of the tokens with a firm Block.one, which attracted $4 billion indicate that their tokens are no such attributes.
The lack of legal protection rooted in the history of cryptocurrency, which is closely linked to chiromancie. Persons who sell protected by tokens on the Internet, hardly need protection from governments. However, when the digital currency or tokens to buy the main consumers, inevitably disputes arise.
For example, if the digital token is considered property, then they should become part of your estate when you die, and your heirs can claim them. However, the person who has the secret key that technically controls the token, creating a potential conflict. This problem arose in the court of Florida in a dispute over the estate of a deceased Dave Kleiman, the heir who filed a lawsuit against Craig Wright, who allegedly captured up to 1 million bitcoins worth billions of dollars. The heir brings an action to return a token for the so-called “misappropriation of movable property”, which in England and Wales only applies to things that are “in possession”.
Some question whether Wright is, as once claimed invented bitcoin and originally owned them. This case shows how the result of a dispute may depend on the ownership status of the digital tokens. Similar problems can arise in cases of theft, bankruptcy or divorce.
Few investors are thinking about the legal status of their cryptocurrency. The lack of prospects of legal protection can further reduce the cost of the tokens, especially if for any reason cease to exist, such financial concepts as trusts or securities. The value of the digital tokens so far have been unpredictable and volatile. It is not excluded that disputes can get lawyers on the property to enter into a full confrontation with the new world of digital assets.
It is possible that in the future the law may expand the rights of ownership of the digital token, for example, by recognizing a new category of “virtual things in possession”, and is the property status of the digital token remains a “zone of doubt”, as was recently stated in the Supreme court of the United Kingdom.