Rethinking Property – Crypto Assets

The conversation about the blockchain can be a long one. This technology has shown the potential to revolutionize everything we know in our modern world. At the core of the blockchain is the decentralization of data (information) which is parallel to the centralization of data in the current systems. As such its use cases are not only admirable despite the knowledge gap contextually. Discussions such as these will definitely reduce the knowledge gap that exists due to the current regulation policy that is more of a ban than an adoption or regulation.

Today we discuss property. What is property? This question does not have bullet proof objective answer. We may however, draw inferences from those characteristics or attributes that may be universally accepted to constitute property. Therefore, more than often we use certain tests to determine what is and what is not property. As such, it is a constitutional right to own property individually or as a group of people. It is a settled position that property may be tangible and intangible property. It may be as well moveable and immoveable property. Therefore, physical assets such as land, cars and other chattels are considered property. Debt instruments such as treasury bills and bonds have been considered property and the concept has been widened to include intellectual property rights such as copyrights which are intangible. There are aspects that we need to traverse especially while looking at property in the blockchain space. These are, trust, scarcity, utility, transferability, traceability, etc. with these we may answer the question as to whether crypto assets are legally protected property.

Ownership of property is a creation of scarcity especially where satisfactory sustainability of people communally is no longer tenable with the available resources. With scarcity value is created out of nothing as long as there is general need for the said item. As such, the item in question should have utility aspects that are unique in nature. There should be a general presumption that the said item may be used in the daily lives of the individuals. With the question of scarcity and utility discussed, the said item should have the ability to be transferable from one person to another. Otherwise, there would be no need for third parties to have the trust that one day they too may own the said item. The item should be able to maintain its value while it moves from one individual to another to avoid a high volatility ratio. This often leads to loss of trust in the item and there after loss in value. A highly volatile item is likely to be abandoned by individuals hence lacking the general acceptance. For instance, whichever form you keep Gold – as pellets, as gold bars, whatever shape – it does not lose its weight once smelt back into its original shape. This guarantees its value along side its utility benefits besides its counterpart – the diamond stone. Transferability does resonate with traceability. In society, there is often the need to use unconventional means to ownership such as theft. With such possibilities, the item should be able to have an identity that is traceable. An item that has the above attributes is and can be considered to be property. The question is, can crypto assets pass the above test? Let’s evaluate and find out.

It is a settled position that in order for a right in intangible property to exist, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties and have some degree of permanence or stability. This set of attributes does engulf the above alluded to attributes as to scarcity, trust, transferability, traceability and utility. While there are thousands of crypto currencies, I will use bitcoin for context. The reasons are obvious – it’s the oldest and parent to them all. The first attribute as to “definable” crypto currencies are computer readable strings of characters which are recorded on networks of computers established for purposes of recording those strings and are sufficiently distinct to be awarded to one account holder. The second attribute is that the right must be identifiable by third parties. As discussed earlier the right to ownership must be able to exclude third parties. This cryptocurrency system does so by allocating everyone a virtual wallet with a public and private key to establish exclusionary powers to the holder against third parties. The third requirement is that the right must be capable of assumption by third parties. This involves two things – respect of rights of the owner and that the asset must be potentially desirable – this covers the trust and scarcity issue discussed earlier.it should be noted that most cryptocurrencies are actively traded in with various trades happening. The market capitalization in cryptocurrency has passed the 3 trillion Dollars mark. In as far as level of stability. Cryptocurrencies are volatile given the up and down movement in prices as recently noted however, there is some degree in permanence since for instance Bitcoin has existed since 2008 with its price hitting 90,000 Dollars at its highest.

Following the above discussion, cryptocurrencies are and can pass the test for property. As such, there is a right protected by law to own cryptocurrencies as property. Courts around the world have agreed with this position issuing injunctions, traceability orders where some individuals’ rights to ownership have been violated. This is one avenue the legislators from Uganda should consider as a starting point to understand the blockchain.