German Legal Professor Talks on Bitcoin’s Permissionless Network Challenging Private Law

Mathias Lehman, Professor and the Institute of International Private Law and Comparative Law’s chairman, wrote an article regarding the world’s best-known cryptocurrency. The essay is named “Who Owns Bitcoin? Private (International) Law Facing the Blockchain.” Within it, Lehman argues against using property law concepts for blockchain, at least in most scenarios.

Two Key Categories

Lehmann had two types of legality concerns in terms of implementing a blockchain. He stated that both of these categories aren’t as discussed by the global media. Instead, they focus on the more apparent issues of fraud or blackmail.

He classified the categories as endogenous (internal) or exogenous (external). Internal problems could be considered things like faulty transfers within a ledger, like a botched transaction. External issues are things like opening insolvency proceedings. He argued that blockchain was incapable of addressing both those issues.

Lehmann stated that Bitcoin isn’t allowing a method to correct erroneous transactions, nor does it allow to move funds in or out of a Bitcoin’s blockchain. He continued, explaining that DLT’s whole purpose was to remove the potential for double-spending. Even so, it doesn’t solve the many other issues considered the norm in private law.

The two significant aspects of Bitcoin that make it so troublesome to apply ordinary private law on it are the irreversibility of its ledger and the “anationality” of its technology.

He explained how whatever state that has the closest connection to the case would be used as per international private law. However, blockchain has now such connections to any country, which makes determining a link a troublesome feat indeed.

This is in stark contrast to permissioned networks that have a sovereign law and several identifiable nodes. Even with its difficulty, several proposals were made in an attempt to attach blockchains to any form of legal connection.

Professor Lehmann argued for a solution involving the application of different national laws. He proposed that this would allow blockchain records to be successfully corrected, where necessary. Lehmann specified making use of things like transfer obligations within the given applicable national law for most cases. This is to try and deal with the irreversibility matter.

Lehman argued that property law ideas and principles must be ignored. The laws must have been embodied in the code ledger; otherwise, it cannot be applied to it. With this, he plans on developing an approach that isn’t overly assertive. A form of law that only corrects results where necessary, making use of forms and procedures within the technology itself.

Lehman also claimed that this approach would dispense the need to identify a single national law that governs the blockchain via the distribution of applicable rules throughout the various relevant legal systems.

This marks a definite step in the right direction for cryptocurrencies as a whole. As the world is starting to accept it, groups will eventually try to regulate it. While that may seem counterintuitive, due to Bitcoin’s nature, it’s better than anarchy.