Izabella Kaminska writes:
George K Fogg at law firm Perkins Coie has been thinking about the problem of past claims (or liens) on bitcoins for nearly 14 months now.
His conclusion: under the United States’ UCC code (uniform commercial code) as long as bitcoins are treated as general intangibles, no high value investor can be sure that an angry Tony Soprano won’t show up one day to claim the bitcoins they thought they received in a completely unencumbered manner are in fact his. In fact, it’s only if and when Tony Soprano publicly renounces his claim to the underlying bitcoin collateral he is owed that the bitcoins stand a chance of being treated as unencumbered. Until then, a hot potato claim risk exists for every future acquirer of Soprano’s bitcoin.
Indeed, given the high volume of fraud and default in the bitcoin network, chances are most bitcoins have competing claims over them by now. Put another way, there are probably more people with legitimate claims over bitcoins than there are bitcoins [emphasis added]. And if they can prove the trail, they can make a legal case for reclamation.
This contrasts considerably with government cash. In the eyes of the UCC code, cash doesn’t take its claim history with it upon transfer. To the contrary, anyone who acquires cash starts off with a clean slate as far as previous claims are concerned. It is assumed, basically, that previous claims on cash are untraceable throughout the system. Though, liens it must be stressed can still be exercised over bank accounts or people.
There is more at the FT link here. And I have a simple question for all you Bitcoin partisans out there: how large is the largest private sector transaction on Bitcoin to date? I’m not “anti-Bitcoin,” and I am glad the regulators have allowed the experiment to proceed, still I’m not persuaded by the arguments that it is going to be a big deal.