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Who Owns Bitcoin? Private Law Facing the Blockchain

Minnesota Journal of Law, Science & Technology

Volume 21, Issue 1, Article 4

2-7-2020

Matthias Lehmann

Director of the Institute for Private International and Comparative Law, University of Bonn, Germany. This paper was presented at a joint seminar of the University of Tokyo and Sophia University Tokyo on April 6, 2018, at a staff seminar at the City University of Hong Kong Law School on April 11, 2018, and at the Digiweek organized by the University of Lausanne (Switzerland) on February 16, 2019. I wish to thank the participants for their helpful comments, in particular Akira Tokutsu, Keisuke Takeshita, Tsubasa Oguri, Tadashi Kanzaki, Takahito Kato, Kelvin Fatt Kin Low, and Pok Chin Stephenson Chow. I am also grateful to the organizers, Professor Hiroyuki Kansaku, André Janssen, Anne-Christine Fornage, Eva Lein, and in particular Tetsuo Morishita, who provided crucial comments. Special thanks go to Stephen Williams for advice on technical issues.
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Recommended Citation

Matthias Lehmann, Who Owns Bitcoin? Private Law Facing the Blockchain, 21 MINN. J.L. SCI. & TECH. 93 (2019).

Available at: https://scholarship.law.umn.edu/mjlst/vol21/iss1/4

The Minnesota Journal of Law, Science & Technology is published by the University of Minnesota Libraries Publishing.

1. ABSTRACT

ABSTRACT

Blockchain, or “distributed ledger technology” (DLT), has been devised as an alternative to the law of finance. While it has become clear by now that regulation in the public interest is necessary—for example to avoid money laundering, drug dealing, or tax evasion—the particularly thorny issues of private law have been less discussed. These include, for instance, the right to reverse an erroneous transfer, the ownership of stolen coins, and the effects of succession or bankruptcy of a bitcoin holder. All of these questions require answers from a legal perspective because the technology does not answer them.

Particular difficulties arise when one tries to apply a property analysis to the blockchain. Surprisingly, it is far from clear how virtual currencies and other crypto assets are transferred and acquired. The traditional requirements posed by private law, such as an agreement between the parties and the transfer of possession, are incompatible with the technology. Moreover, the idea of a “void” or “null” transfer is hard to reconcile with the immutability that characterizes the blockchain.

Before any such questions can be answered, it is necessary to determine the law governing blockchain transfers and assets. This is the point where conflict of laws, or “private international law,” comes into play. Conflicts lawyers are used to submitting legal relations to the law of the country with the most significant connection. But seemingly insurmountable problems occur because decentralized ledgers with no physical connecting factors do not lend themselves to this type of “localization” exercise.

The issue of this paper therefore is: How can blockchain be squared with traditional categories of private law, including private international law? The proposal made herein avoids the recourse to a newly fashioned “lex digitalis” or “lex cryptographica.” Rather, it is suggested that the problems can be solved by using existing national laws, supplemented by an international text. At the same time, the results produced by DLT should also be accepted as legally protected and corrected only where necessary under the applicable national rules. In this way, a symbiosis between private law and innovative technology can be created.

• Introduction

• A. Does Code Need Law?
  • 1.)A Global Transfer Mechanism Without a Legal Basis
  • 2.)Private Law Problems that May Arise from DLT Transfers
    • a) Endogenous Transfer Problems
    • b) Exogenous Transfer Problems
  • 3.)Intermediate Conclusion
• B. Code’s Resistance to the Law
  • 1.)The Autonomy of the Blockchain Vis-à-Vis National Law
  • 2.)The Irreversibility of Blockchain Transfers
  • 3.)The A-National Character of the Blockchain
• C. How to Reconcile DLT and Private Law
  • 1.)Underpinnings of the Proposal
  • 2.)Accept DLT as a Fact
  • 3.)Focus on the Reverse Transaction
  • 4.)Stop Thinking About Property Transfers
• D. Counter-Arguments and Complications
  • 1.)Theft Without Ownership?
  • 2.)The Case of Hacked or Illegally Obtained Crypto Assets
  • 3.)Transfers Outside the Blockchain
  • 4.)Applicable Law
• Conclusion