Where is Bitcoin? (Part I)

Although, from a strictly technical point of view, it may seem relatively irrelevant, from a legal perspective the physical location of bitcoins It does have an importance that, sooner rather than later, will come to light.

It is irrefutable that one of the characteristics of Bitcoin is precisely its character decentralized. What’s more, it is undeniable that this decentralized nature is precisely one of the pillars on which it is based and what guarantees its future success.

Likewise, and with respect to its regulation, we have already anticipated in a previous article that, from the very moment in which it serves to transmit value from one point to another, Bitcoin was born regulated.

However, it is no less true that this regulation (at least in Spain), seems insufficient to fulfill its intended purpose, since said regulation was not created specifically to regulate digital currencies. What’s more, part of the regulations that would apply to Bitcoin date back to before the Internet itself existed and, in some cases, it has been in existence for more than a century. This makes it extremely difficult to fit Bitcoin into regulations that were not created for it, but rather apply to it, in many cases, by analogy.

It is precisely in the aforementioned decentralized character where the lack of an adequate regulatory framework. In this sense, current legislation fails to understand that something may not physically be anywhere (and everywhere at the same time).

Until now, in “Internet” matters (anyone who has had the opportunity to read a Judgment that dealt with websites, domains or encryption will appreciate the ironic tone of the quotation marks) both the legislator and the Judge have been enough to know that there was a server that hosted the content, even if it was in Mozambique or Kuala Lumpur.

However, the aforementioned decentralized nature of Bitcoin has made the regulatory and jurisprudential framework that we had until now obsolete (at least in Spain).

Consequently with the above, in the next entries of this series of posts –Where is the Bitcoin?-, we will go through examples in which the determination of the location of bitcoins may have special relevance, such as the determination of the Jurisdiction applicable to a controversy based on cryptocurrencies, the existence or not of the obligation to declare bitcoins as goods and rights abroad or the difficulty when using physical or technical means to lock an embargo on digital currencies.

And to the readers. Can you think of more examples in which the location of bitcoins could have legal implications? How do you think the location of bitcoins should be determined for legal purposes? Do you think that specific regulation for cryptocurrencies is necessary?

Go to Where is Bitcoin? (Part II)

[gdlr_divider type=»solid» size=»50%» ]

This article has been written jointly by Antonio Gómez de la Cruz Alcañiz, Lawyer specialized in Civil and Commercial Law and for Alejandro Gómez de la Cruz Alcañiz, Lawyer specializing in cryptocurrency taxation.