Trace Meyer: Legal Classification of Bitcoin

His presentation (with answers to questions) at the recent Bitcoin conference:

Trace Meyer is a lawyer who probably wrote the first book on Bitcoin law.

There are a couple of interesting questions raised here.

For one, Trace Meyer says Bitcoin private keys are “speech”, which would give them Constitutional protection.

I am not sure how a random string of numbers and letters could qualify. On the other hand, you could probably use a string of private key length that actually has a meaning as a private key, and that particular case would definitely qualify.

I don’t think that private keys are speech. One reason is that they have usually no meaning. Another is that they are not intended to be disclosed to someone else, certainly not as part of a public discussion, where freedom of speech is most necessary in a democracy.

I agree that one of the problems comes from the fact that Bitcoin is affected by many jurisdictions. That makes it hard to comply with all rules.

I also agree with the idea that the dollar is like common stock of the American government. Bitcoin gives a new alternative, since it is not linked to any particular government in any way. I’m not sure if I would call that a “kryptonite dagger”, like Trace Meyer did, but it sure is significant.

There were also a couple of interesting questions from the audience.

One asked what happens if Bitcoin becomes illegal some day in some jurisdiction. What happens to people who bought Bitcoin before that law came into effect?

There are two things to consider here. For one, criminal law can’t be enacted ex post facto. You won’t get punished for something that was legal at the time of the act.

But there is also the property aspect. I think if some government goes ahead and makes Bitcoin illegal, for the very least they need to compensate holders of Bitcoin at the market price at the time the new law comes into effect.

Then there was the question of how one deals with a situation where two or more people know the private key to a Bitcoin address.

The simple answer would be that every one of them would be entitled to spend exactly his share in that account, if they don’t have any other agreement. But this is interesting as a test case to ask what Bitcoin actually is under the law.

My point of view on that question can be described in two parts.

For one, there are certain things that Bitcoin is not. It is not currency, since right now no state has adopted it as such. It is not legal tender for the same reason. It is not e-money under the EU e-money Directive, since there is no issuer. It is not based on clear legal definitions in national or international law right now; those will come later.

And the other part is things that Bitcoin is. It is information, and protected against such from unauthorized access to computers (hacking). It has economic value which is enough to trigger protection against fraud (at least under German law). It is a “financial instrument” under EU financial market regulation. That means that Bitcoin exchanges need licenses and that Bitcoin markets are protected against market manipulation. Finally, the idea that the owner of a private key has the right to dispose of the Bitcoins in some address is legally founded in contract law (this last point would need a post of its own to explain, I just put it out here without discussion).


Published by kflenz

Professor at Aoyama Gakuin University, Tokyo. Author of Lenz Blog (since 2003,

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