Making bitcoin ‘legal’ by using 19th century English law?
Researchers from Cambridge University argue that crypto-currency theft is not the fault of technology but because existing laws are not being applied
A team of Cambridge University cybersecurity researchers are about to release a proof-of-concept software tool, reports Wired magazine, that they say will scan blockchains to identify bitcoins that have been stolen.
But instead of inventing a new and highly-sophisticated solution to tackle the constant problem of theft, the team have based their work on a legal precedent from an 1816 British court decision. Known in English common law as Clayton’s Case, the precedent applies a “legal fiction” to rule that the first coin into a bank account can also be understood to be the first coin out.
Ross Anderson, Ilia Shumailov and Mansoor Ahmed from the Cambridge University Computer Laboratory, in an absorbing paper entitled “Making Bitcoin Legal,” write that the “bitcoin protocol is fascinating. It has created what appears to be a global trusted computer out of a mixture of cryptography and incentives, despite the facts that many of the actors are shady and many of the circulating crypto-coins have been stolen at least once. Out of this swamp, the value of bitcoin has soared.”
The researchers go on to argue that the first coin that leaves a bitcoin address can be considered to be the same coin as the first one that went into it and so will carry with it all of that coin’s criminal history.
“If 10 sheep wandered in Roman times from Marcus’s field into Pliny’s, then the court would let Marcus take any 10 of Pliny’s sheep,” say the Cambridge team. “But today, all sheep have electronic tags, so Marcus can get the right sheep back. So too with bitcoin.”
The researchers conclude that when it comes to crypto-currency theft, it is not technology that is at fault, but the lack of application of existing laws.
“In the brave new world of ICOs and thousand percent crypto-currency inflation, the rich and powerful are the bitcoin exchanges. What would happen if [financial] regulations and the laws against money laundering were applied to them, and extended by sensible case law? We argue that this could mitigate most of the worst excesses of cryptocurrency world, and turn a dangerous system into a much safer one.
“The curious thing about this change is that it would not involve changing the protocol. It would not even necessarily involve changing the law. It might be enough to take some information that’s already public, publishing it again in a more easily understood format.”
And who would ever argue with that?