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Self-styled Satoshi Nakamoto Craig Wright claims 2020 is the year the law comes for Bitcoin, which could spell trouble for Bitcoin miners and the Lightning Network.
The man who claims to be Satoshi Nakamoto says 2020 is the year the law comes for Bitcoin. Writing on his personal blog, Craig Wright offered a view of Bitcoinâs future which doesnât bode well for operators of Bitcoinâs Lightning Network, or the coinâs miners.
One of Bitcoinâs biggest attractions is its supposedly permissionless, authority-resistant nature. But according to Wright, these are illusions.
Wright claims that any amount of Bitcoin purchased without meeting legally recognized CDD (customer due diligence) and KYC (know your customer) requirements is, in effect, stolen Bitcoin.
According to Wright, that spells trouble for Lightning Network operators who receive such âstolenâ Bitcoin:
âLightning is about creating a system that is not built on individual tokens, but rather balances, because they are treated very differently under law. Yet, the Lightning Network cannot work without Bitcoin tokens as the initial seed base. Here lies the greatest flaw of the system.â
Wright claims the Lightning Networkâs system of symbols and balances wonât shield it from legal investigation and enforcement.
âIf stolen bitcoin are passed into a Lightning channel, the purchaser in the Lightning channel does not gain good title. Equivalently, the civil rule of nemo plus iuris ad alium transferre potest quam ipse habet, or, âone cannot transfer to another more rights than he hasâ, means that it does not matter whether you send bitcoin to a Lightning channel; if the bitcoin are stolen, they cannot be transferred.â
Wright also cites the legal principle of Nemo dat quod non habet - or, âno one can give what they donât have.â If the legal rights to the âstolenâ coins are not transferred legally, then in Wrightâs view, this would leave the Lightning Network open to the threat of a court-sanctioned freezing order.
Going further still, Wright reiterates another ominous scenario for Bitcoin miners. Namely, that any miner who receives or mines âstolenâ Bitcoin can be pursued by authorities under a nationâs standard theft laws.
Wright cites a section of the UKâs Theft Act (1968) which covers the handling of stolen goods - a charge that comes with a 14 year maximum prison sentence in the United Kingdom.
âA person handles stolen goods if (otherwise than in the course of the stealing) knowing or believing them to be stolen goods he dishonestly receives the goods, or dishonestly undertakes or assists in their retention, removal, disposal or realisation by or for the benefit of another person, or if he arranges to do so.â
Craig Wrightâs prognostications are based on his assumption that Bitcoin is stolen if not purchased under the purview of CDD and KYC laws. At the moment, no such enforcement of ownership laws surrounding Bitcoin actually exists.
Attorney at law, Preston J. Byrne, notes that Wrightâs scenario doesnât play out unless a universally agreed upon âblacklistâ of stolen coins were available for all to see. Byrne says:
âIf there were a central register of stolen BTC established by law of which every BTC purchaser in a given jurisdiction was deemed to have constructive notice of these claims, notice could be imputed if any party failed to check that register and then accepted payment in blacklisted coins.â
As Byrne points out, no such register currently exists. The law may very well come to meet Bitcoin one day, but will it be under the circumstances that Craig Wright suggests?
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