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Ultimately this is still legally undecided, and will remain so until a court decides it. Given that cryptocurrency exchanges have operated in a legal and straig

by PaulAJ 9y ago

Ultimately this is still legally undecided, and will remain so until a court decides it. Given that cryptocurrency exchanges have operated in a legal and straightforward way by treating cryptocurrencies as money, I suspect that courts will tend towards preserving the status quo. It is true that in other legal contexts courts and governments have decided to treat Bitcoin as a commodity, but they have no problem calling it "money" when requiring exchanges to register as money service businesses. This is not inconsistent because the definitions of "money" and "commodity" are local to each law; tax law has a narrower definition of money than the laws regulating money service businesses. So it would be perfectly reasonable and consistent to say that, for the purposes of title, cryptocurrencies are treated as money regardless of the way they are treated elsewhere in the law. Even if Bitcoins are treated as a commodity for property law purposes, title is unlikely to follow them in practice. If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address. In cases where this occurs as a physical process (e.g. putting petrol in a car) the law (at least in the UK, I don't know about anywhere else) treats the mixing as a one-way step. So if you put petrol in your car and then find you can't pay, the garage is not allowed to siphon the petrol back out because they will inevitably take some of your petrol as well as their own. Once the mixing has happened the petrol is your property, although of course you still have to identify yourself and accept the debt, or be guilty of "making off without paying". Similar arguments apply to food at a restaurant. By a similar argument, it can be argued that once stolen Bitcoins have been mixed with others in a common address it is not possible to distinguish the stolen bitcoins. Hence they become the property of the person who has acquired them. Whether these arguments will actually persuade a court remains to be seen, but the legal situation is more complex than the original article lets on.

cesarb 9y ago
> but they have no problem calling it "money" when requiring exchanges to register as money service businesses. Is that because they treat Bitcoin as "money", or because they treat Bitcoin as a "money transfer" mechanism, that is, a way to send money to someone else? > If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address. That simplified view is not how Bitcoin actually works. In your example, the single address now has two separate and distinct "unspent transaction outputs", one for the transaction from source A, the other for the transaction from source B. The mixing will happen only once they are spent, since the wallet software can use either of them, or both, as the input(s) for the outgoing transaction; but before that happens, they could easily be separated. In fact, there is no real or virtual object which could be called a "Bitcoin". The Bitcoin blockchain is a distributed ledger which records statements like "of the combination of the previously unspent outputs A, B, and C, an amount of X will go to a new output D with key K, an amount of Y will go to a new output E with key L, and the rest will go to whoever generates a valid block which includes this transaction"; the unit of measurement for these amounts is what is "Bitcoin". Saying an address "has X Bitcoin" is a simplification for "the address has the keys corresponding to a set of unspent transaction outputs, which together sum to an amount of X Bitcoin". So the "stolen Bitcoins" are "spent" the moment they are transferred to a new address, and can't ever be given back (a transaction output can only be spent once). What can be given back is a new set of transaction outputs, with the equivalent amount of Bitcoin. Whether that makes a material difference for the courts, I can't say, but it at least muddles the waters a bit more.
- a_t48 9y ago
  How different is this _really_ from storing money in my checking account? The bank doesn't allocate individual stacks of bills for each account, they just have a number which is how much money of mine they are holding (which is created from a series of deposits and withdrawals).
  - cesarb 9y ago
    A checking account is closer to the intuitive "this account has X amount of money"; the transactions are "add X money to the account" and "subtract X money to the account". With Bitcoin, it's as if you had thousands of tiny checking accounts, every time you received money created a new one, and you could withdraw each account only once, and always for the full value (if you wanted to use only part of an account, you had to send the rest to a new account).
  - yebyen 9y ago
    The main difference is that anyone can create a practically untraceable address as many times as they want. So if you have a lot of tainted Bitcoin and you want to obscure the source without risking putting it through a mixer, you can create N addresses and start sending coin to (and through) them. Compared to checking accounts; I can't just generate a thousand checking accounts that don't belong to any identity and generate a transaction history that appears to show many transactions occurred between hundreds of parties. It's still not as good as mixing with other Bitcoin of alternate origin (if I only have the tainted coins at the beginning, I will still have 1000 accounts with only all of the same tainted coins when I am done, and a careful analysis will show that these 1000 addresses were funded entirely by the original tainted coins). But each seller cannot be expected to perform this careful analysis, and as you are able to exchange known tainted coins for clean coins and mix them, you can increase the uncertainty that a legitimate transaction is taking place that is separate from the one that originally generated your ownership of the tainted coins.
  - rini17 9y ago
    If the bank worked kinda like bitcoin, it would track serial numbers of all unspent bills deposited into the account.

by PaulAJ 9y ago

cesarb 9y ago

> but they have no problem calling it "money" when requiring exchanges to register as money service businesses. Is that because they treat Bitcoin as "money", or because they treat Bitcoin as a "money transfer" mechanism, that is, a way to send money to someone else? > If I take some BTC from source A and put it in an address, and then some BTC from source B and put it in the same address, the two lots of BTC are now mixed up in a single address. That simplified view is not how Bitcoin actually works. In your example, the single address now has two separate and distinct "unspent transaction outputs", one for the transaction from source A, the other for the transaction from source B. The mixing will happen only once they are spent, since the wallet software can use either of them, or both, as the input(s) for the outgoing transaction; but before that happens, they could easily be separated. In fact, there is no real or virtual object which could be called a "Bitcoin". The Bitcoin blockchain is a distributed ledger which records statements like "of the combination of the previously unspent outputs A, B, and C, an amount of X will go to a new output D with key K, an amount of Y will go to a new output E with key L, and the rest will go to whoever generates a valid block which includes this transaction"; the unit of measurement for these amounts is what is "Bitcoin". Saying an address "has X Bitcoin" is a simplification for "the address has the keys corresponding to a set of unspent transaction outputs, which together sum to an amount of X Bitcoin". So the "stolen Bitcoins" are "spent" the moment they are transferred to a new address, and can't ever be given back (a transaction output can only be spent once). What can be given back is a new set of transaction outputs, with the equivalent amount of Bitcoin. Whether that makes a material difference for the courts, I can't say, but it at least muddles the waters a bit more.

a_t48 9y ago
How different is this _really_ from storing money in my checking account? The bank doesn't allocate individual stacks of bills for each account, they just have a number which is how much money of mine they are holding (which is created from a series of deposits and withdrawals).
- cesarb 9y ago
  A checking account is closer to the intuitive "this account has X amount of money"; the transactions are "add X money to the account" and "subtract X money to the account". With Bitcoin, it's as if you had thousands of tiny checking accounts, every time you received money created a new one, and you could withdraw each account only once, and always for the full value (if you wanted to use only part of an account, you had to send the rest to a new account).
- yebyen 9y ago
  The main difference is that anyone can create a practically untraceable address as many times as they want. So if you have a lot of tainted Bitcoin and you want to obscure the source without risking putting it through a mixer, you can create N addresses and start sending coin to (and through) them. Compared to checking accounts; I can't just generate a thousand checking accounts that don't belong to any identity and generate a transaction history that appears to show many transactions occurred between hundreds of parties. It's still not as good as mixing with other Bitcoin of alternate origin (if I only have the tainted coins at the beginning, I will still have 1000 accounts with only all of the same tainted coins when I am done, and a careful analysis will show that these 1000 addresses were funded entirely by the original tainted coins). But each seller cannot be expected to perform this careful analysis, and as you are able to exchange known tainted coins for clean coins and mix them, you can increase the uncertainty that a legitimate transaction is taking place that is separate from the one that originally generated your ownership of the tainted coins.
- rini17 9y ago
  If the bank worked kinda like bitcoin, it would track serial numbers of all unspent bills deposited into the account.