By Chris Cooper
Bitcoin is a virtual currency that can be used to buy anything from pizza to plane tickets. It has also become the currency of choice for online drug purchases and other illicit activities, since transactions are anonymous and not regulated.
However, as the popularity of Bitcoin and other such “cryptocurrencies” are beginning to have an impact on nearly every facet of the law, legal practitioners are at a loss to find a comprehensive source of legal information surrounding their usage and practices.
With the recent launch of BitcoinLawReview.org, though, that quest is over.
“We initially found there is a significant gap in terms of locating any legal information regarding such an industry, particularly online,” said Robert Wilkey, the Principal Attorney at Exton-based Wilkey Legal Consultants who developed the website. “It will serve as the very first comprehensive online legal resource and compendium to assist attorneys with Bitcoin- and cryptocurrency-based legal information, jurisprudence, domestic and international standards, regulations, guidelines, treatises, and legal articles.”
The public can buy or sell Bitcoins through several marketplaces called Bitcoin Exchanges. New bitcoins are generated by a competitive and decentralized process called “mining,” and anyone with access to the Internet and suitable hardware can participate.
Alternatively, there are now machines similar to ATMs that enable one to directly exchange Bitcoins and cash. Once purchased, Bitcoins are stored in a user’s “digital wallet” – either on the cloud or that user’s computer.
A sampling of retailers that accept payments in Bitcoin include Subway, Microsoft, Expedia, Overstock.com, J.C. Penney, and Dell. There are no transaction fees on any sales or purchases, and all the transactions are private. Unlike the holdings in a regular bank, Bitcoin accounts are not insured by the FDIC.
“In the past year and a half, I’ve increasingly come across clients that have had Bitcoin-related legal issues,” he said. “For example, the issue has arisen on whether or not a client or a party in the course of litigation should disclose their Bitcoin assets, especially when the discovery is only focused around FDIC-insured or estate holdings.”
Wilkey also referred to issues related to the purchase and sale of Bitcoin-mining hardware and software, and divorce proceedings in which the court may need to obtain access to digital holdings that are not tangible assets. “Those are just a few generic examples that prompted my research into this space,” he said. “What I initially discovered is that, since it’s not regulated, it’s very challenging for attorneys to find any guidance. So I started to develop and gather research that became the impetus for the website.”
As he developed the site, Wilkey noticed an emerging body of legal work and laws pertaining to Bitcoin and cryptocurrencies in many fields, including finance, contracts, consumer protection law, taxation, and family law.
“There is an exoskeleton of law that’s starting to form, whether that be the courts that are beginning to make different legal decisions and conclusions regarding Bitcoin, or others who are trying to shape the law as it pertains to this,” he said. “And you now have a number of government agencies that are putting out agency-related guidance.”
Wilkey wants his website to be a primary legal resource for law practitioners, government officials, and nonprofits.
“Basically it’s for anybody who wants to research or better understand the relationship between Bitcoin and cryptocurrencies, and various legal-related issues,” he said. “Whether they be contract-related issues, consumer rights, or criminal law.”
He cited, for example, a recent court case that held that Bitcoin holdings can be deemed money laundering, for purposes of the money laundering statute.
Visitors to the website will also be able to sign up for a monthly newsletter that will provide updates to both practitioners and non-practitioners on legal issues related to Bitcoin and cryptocurrencies. Initially the newsletter will be free, with the prospect of becoming a subscription service in the long term.
Does Wilkey have any advice for anyone considering an investment in virtual currencies?
“Try to learn as much as possible about it, especially the consumer or investor rights related to Bitcoin,” he said. “There are the beginnings of guidance on relevant laws out there that may assist them in forming their decision, or at least in helping them become informed investors or purchasers of such a digital asset.”
With such head-spinning terms – like the “hash rate,” the “QR code,” and the “difficulty factor” – potential Bitcoin users have much to learn.
According to Wilkey, Bitcoin and, more generally, cryptocurrencies will likely continue to have a profound impact on every facet of the law, including fields of law that most attorneys would not reasonably expect, based on the body of legal information compiled to date.
“From an attorney perspective, maybe five, ten years down the road, every attorney regardless of the field they practice in will likely need to have a minimum level of knowledge cryptocurrencies,” he said. “That’s what I foresee happening.”