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According to the paper, each user of the system could have one or more public Bitcoin addresses – sort of like bank account numbers – and a private key for each address. The coins attached to a given address could be spent only by a person with the private key corresponding to the address. The private key was slightly different from a traditional password, which has to be kept by some central authority to check that the user is entering the correct password. In Bitcoin, Satoshi harnessed the wonders of public-key cryptography to make it possible for a user – let’s call her Alice again – to sign off on a transaction, and prove she has the private key, without anyone else ever needing to see or know her private key. Once Alice signed off on a transaction with her private key she would broadcast it out to all the other computers on the Bitcoin network. Those computers would check that Alice had the coins she was trying to spend. They could do this by consulting the public record of all Bitcoin transactions, which computers on the network kept a copy of. Once the computers confirmed that Alice’s address did indeed have the money she was trying to spend, the information about Alice’s transaction was recorded in a list of all recent transactions, referred to as a block, on the blockchain. […] The result of this complicated process was something that was deceptively simple but never previously possible: a financial network that could create and move money without a central authority. No bank, no credit card company, no regulators. The system was designed so that no one other than the holder of a private key could spend or take the money associated with a particular Bitcoin address. What’s more, each user of the system could be confident that, at every moment in time, there would be only one public, unalterable record of what everyone in the system owned. To believe in this, the users didn’t have to trust Satoshi, as the users of DigiCash had to trust David Chaum, or users of the dollar had to trust the Federal Reserve. They just had to trust their own computers running the Bitcoin software, and the code Satoshi wrote, which was open source, and therefore available for everyone to review. If the users didn’t like something about the rules set down by Satoshi’s software, they could change the rules. People who joined the Bitcoin network were, quite literally, both customers and owners of both the bank and the mint.” 3.5. That Satoshi and the Cypherpunks who participated in the initial experiments developed Bitcoin as an alternative to conventional currency, to counter the problems of debasement of currency by central agencies, was made clear by Satoshi himself when he said: “The root problem with conventional currency is all the trust that’s required to make it work. The Central Bank must be trusted not to debase the currency but the history of fiat currencies is full of breaches of that trust.” 3.6. What attracted people to Satoshi’s proposal, was the fact that while Central Banks had no restraints in unlimited printing of money, thereby devaluing all savings and holdings, the Bitcoin software had rules to ensure that the process of creating new coins would stop after 21 million were out in the world. When Martti Malmi, a student at the Helsinki University of Technology, joined hands with Satoshi to improvise the project and to market it, he formulated the philosophy in the following words:

6.72. The Securities and Exchange Commission (SEC) of the United States of America prosecuted a person by name Trendon Shavers, who was the founder and operator of Bitcoin Savings and Trust (BTCST), for soliciting illicit investments in Bitcoin related opportunities from a number of lenders, defrauding them to the tune of 700,000 BTC in funds. While SEC contended that Bitcoin investments were securities, Shavers contended that Bitcoin is not money and hence, not ‘securities’. But the Sherman Division Eastern District Court of Texas opined in SEC v. Trendon Shavers,44 that: “It is clear that bitcoin can be used as money. It can be used to purchase goods or services and as Shavers stated, used to pay for individual living expenses. The only limitation of bitcoin is that it is limited to those places that accept it as currency. However, it can also be exchanged for conventional currencies such as the US dollar, euro, yen and Yuan. Therefore, bitcoin is a currency or form of money…” 6.73. In United States v. Ulbricht,45 the United States District Court, Southern District, New York was concerned with the defendant’s motion to dismiss four counts namely (i) participation in a narcotics trafficking conspiracy (ii) a continuing criminal enterprise

With such volatility they have a limited ability to act as a store of value, another important attribute of money. This court is not an expert in economics, however it is very clear, even to someone with limited knowledge in the area, that Bitcoin has a long way to go before it is equivalent of money. The Florida Legislature may choose to adopt statutes regulating virtual currency in future. At this time, however, attempting to fit the sale of Bitcoin into a statutory scheme regulating money services businesses is like fitting a square peg in a round hole” 6.81. But the decision of the Circuit Court was appealed to the Third District Court of Appeal, State of Florida. By an opinion rendered on 30-01-2019, reported as State of Florida v. Michell Abner Espinoza54 the Court of Appeal reversed the decision of the Circuit Court and held, after referring to the June 2014 Report of FATF titled “Virtual currencies: key definitions and potential AML/CFT risks” that given the plain language of the Florida statutes governing money service businesses and the nature of bitcoin and how it functions, Espinoza was acting both as a payment instrument seller and engaging in the business of a money transmitter. The Court of Appeal pointed out that the definition of a “payment instrument” included “a cheque, draft, warrant, money order, travelers’ cheque, electronic instrument or other instrument, payment of money or monetary value, whether or not 54 264 So. 3d 1055 (2019) negotiable”. The phrase “money services business” was defined in the statute to include any person who acts as a payment instrument seller. Since the expression monetary value means a medium of exchange, whether or not redeemable in currency, the court concluded that VCs are payment instruments and hence a person dealing with the same is in money services business. Though Bitcoin does not expressly fall within the definition of “currency” found in the statute, the court concluded that Bitcoin would certainly fall under the definition of a payment instrument. The Court of Appeal took note of the fact that several restaurants in the Miami area accepted Bitcoins as a form of payment and hence Bitcoin functions as a medium of exchange. (What is important to note about this decision is that it dealt with a penal statute. This is why the Circuit court followed the cautionary approach, not to allow a citizen to be prosecuted on the basis of conjectures about what is a money services business. But the Court of Appeal found on fundamentals that the business concerned a payment instrument and that therefore, there was no ambiguity.) 6.82. In a completely different context, the Singapore International Commercial Court ruled in B2C2 Ltd. v. Quoine Pte Ltd.,55 that virtual currency can be considered as property which is capable of being held on trust. The case arose out of a dispute 55 [2019] SGHC (I) 3 between a person who traded in virtual currencies and the VC Exchange platform on which he traded. The dispute revolved more around the breach of contract and breach of trust than around the identity of virtual currencies. It was in that context that the court opined that crypto currencies satisfied the definition of ‘property’ as provided by the House of Lords in National Provincial Bank v. Ainsworth56 to the effect that 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”. The court further noted that “crypto currencies are not legal tender in the sense of being a regulated currency issued by a government but do have the fundamental characteristic of intangible property as being an identifiable thing of value”. The decision of the Commercial Court was appealed to the Court of Appeal. While dismissing Quoine’s appeal on breach of contract claim, but allowing it on breach of trust claim, the Court of Appeal held in Quoine Pte Ltd v. B2C2 Ltd57 that though crypto currencies are capable of assimilation into the general concepts of property, there are difficult questions as to the type of property that is involved. Therefore, the Court of Appeal did not take a final position on the question, since it felt that the precise nature of the property right involved, was not clear.

56 [1965] 1 AC 1175 at 1248 57 [2020] SGCA (I) 02 6.83. In a very recent decision, in AA v. Persons Unknown & others Re Bitcoin,58 the English High Court ruled that Bitcoin is property. But this decision was on the basis of the definition adopted by UK Jurisdictional Taskforce of the Law Tech Delivery Panel, in its “Legal Statement on the Status of Cryptoassets and Smart Contracts”, that crypto assets constitute property under English law. The facts out of which this decision arose, were peculiar. The IT system of a Canadian insurance company was hacked through a malware called Bitpaymer, which encrypted all the data of the company. A ransom equivalent of US $ 950,000 in Bitcoin was demanded by the hackers for decryption. After negotiations through a specialist intermediary by name Incident Response Company, the insurance company paid the ransom into a wallet and retrieved the data with the decryption tools provided by the hackers. Thereafter the insurance company engaged the services of a blockchain investigation outfit known as Chainalysis Inc., which found that of the total of 109.25 Bitcoins transferred as ransom, 13.25 Bitcoins (worth approximately US $ 120,000 at the time) had been converted into an untraceable fiat currency. The remaining 96 Bitcoins had been transferred to a “wallet” linked to a Virtual Currency exchange known as Bitfinex (registered in the British Virgin Islands). The insurance company then sued the VC Exchange before the High 58 [2019] EWHC 3556 (Comm) Court and sought ancillary disclosure orders to know the identity of persons who held the Bitcoins in the wallet of the exchange. The company also sought a proprietary injunction. Interestingly, the Court agreed to hear the application in private and protect the identity of the insurer which got hacked, for they feared retaliatory copycat attacks. The core issue before the court was whether crypto currencies constituted a form of property capable of being the subject matter of a proprietary injunction. After referring to Fry L.J’s statement in Colonial Bank v. Whinney,59 that all things personal are either in possession or in action and that the law knows no third category between the two and also after referring to the four classic criteria for property, [namely they are (i) definable; (ii) identifiable by third parties; (iii) capable in their nature of assumption by third parties; and (iv) capable of some degree of permanence] set out by Lord Wilberforce in National Provincial Bank v. Ainsworth (supra), Bryan, J held in AA v. Persons Unknown that virtual currencies are neither choses in action (not embodying a right capable of being enforced in action) nor choses in possession (being virtual and incapable of being possessed). However, the court ruled that VCs can still be treated as property, by applying the 4 criteria laid down in National Provincial Bank and Law Tech Delivery Panel's Legal Statement, though it did not constitute a statement of the law. Bryan 59 [1885] 30 ChD J. was convinced that the statement's detailed legal analysis of the proprietary status of cryptocurrencies was “compelling” and should be adopted by the court. Thus, what prevailed with the court was the definition provided by Law Tech Delivery Panel’s UK Jurisdiction Task Force, which, unlike RBI, did not enjoy a statutory status, but was only an industry-led government backed initiative.