On Tue, Jan 20, 2015 at 12:23:14PM -0500, Matt Whitlock wrote:
> On Tuesday, 20 January 2015, at 10:46 am, Peter Todd wrote:
> > I was talking to a lawyer with a background in finance law the other day
> > and we came to a somewhat worrying conclusion: authors of Bitcoin wallet
> > software probably have a custodial relationship with their users,
> > especially if they use auto-update mechanisms. Unfortunately this has
> > potential legal implications as custodial relationships tend to be
> > pretty highly regulated.
> > 
> > Why is this? Well, in most jurisdictions financial laws a custodial
> > relationship is defined as having the ability, but not the right, to
> > dispose of an asset. If you have the private keys for your users'
> > bitcoins - e.g. an exchange or "online" wallet - you clearly have the
> > ability to spend those bitcoins, thus you have a custodial relationship.
> If you have the private keys for your users' bitcoins, then you are every bit 
> as much the owner of those bitcoins as your users are. There is no custodial 
> relationship, as you have both the ability and the right to spend those 
> bitcoins. Possession of a private key is equivalent to ownership of the 
> bitcoins controlled by that private key.

Posessing a private key certainly does not give you an automatic legal
right to anything. As an example I could sign an agreement with you that
promised I would manage some BTC on your behalf. That agreement without
any doubt takes away any legal right I had to your BTC, enough though I
may have have the technical ability to spend them. This is the very
reason why the law has the notion of a custodial relationship in the
first place.

Don't assume the logic you'd use with tech has anything to do with the
logic courts use.


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