Can You Legally ‘Possess’ Bitcoin? Journal of Law and Tech (JOLT) and University of Richmond Dispute
The power to spend bitcoin’s in one’s possession is dependent upon having the key – or keys, if there is a multi-signature involved. Most hacks have involved cases where the hackers were able to possess the security keys, thereby enabling them to access the coins.
Even though legal scholars seem to disagree, in the United States and China, bitcoin is treated as legal property. In China, a recent court case determined not only that bitcoin is personal property, but that it is the type of property that can be legally possessed, unlike contraband.
Concerning the basis for legal scholars’ assertion that bitcoin is not legal property, it comes from a research paper published by the University of Richmond’s Journal of Law and Technology. The journal article discusses that cryptographic tokens may not be legal property, particularly in England and Wales. The author of the paper wrote,
“So what about digital tokens such as crypto-currencies.? Tokens don’t physically exist. They are entries of a virtual ledger. And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession.”
To support his position, the article’s author cites to case law from the same jurisdictions that determines that carbon emission credits, while tradable assets, does not have the same properties as cryptocurrencies. For example, they cannot be used to purchase goods and services. Nonetheless, even though a like-element could not be seen as property, the authors of the study did not completely conclude that cryptocurrency cannot be property.
The study determined, “It seems likely that many tokens on blockchain-based applications will also satisfy this test.427 They can be defined as the right to control the token; are identifiable through entries on the blockchain; can be transferred by submitting transactions; and are registered with a high degree of permanence and stability.428 This suggests that holders of digital tokens could have a property interest under common law.
However, classifying that property interest is more difficult.429 Common law distinguishes between real property (land) and personal property (all other property).430 Personal property is traditionally further split into choses in possession and choses in action.431 Patents are granted a separate property status by law as a form of personal property without being a chose in action.”
As of today, many courts have determined that bitcoin is an asset. Even though there is a journal article that argues otherwise, it does not mean that the courts have done so as well. Further, whether bitcoin is property depends upon the jurisdiction that one is in.