The Commercial Law of Bitcoin and Blockchain Transactions
Uniform Commercial Code Law Journal, Forthcoming
24 Pages Posted: 25 Nov 2016 Last revised: 1 May 2017
Date Written: November 22, 2016
This paper looks at some issues that may arise as Bitcoin, and its underlying blockchain technology, plays a greater role in commercial transactions. Bitcoin and other public blockchains permit identification of every transaction that has occurred. But tracing bitcoin – an issue arising in cases from fraud to secured transactions - will not be technically possible in many cases. Equitable tracing doctrines, along with information beyond the blockchain, may fill the gap. Blockchain smart contracts may provide self-help as an alternative to legal enforcement. Coding transactions, however, will not necessarily put them beyond the scope of contract law. Beyond that, some smart contracts may be functionally more like letters of credit, and so be subject to the principles of documentary credits. Smart contracts used in financing transactions may be limited by the debtor-protective principles of Article 9 of the Uniform Commercial Code. Existing commercial law principles could be adapted to cryptocurrencies and the blockchain, as some have persuasively argued. Sensitivity to existing practices should guide such regulation, as discussion of relevant adaptations of the law to technological change suggest.
Keywords: Bitcoin, Cryptocurrency, Blockchain, Smart Contracts, Commercial Law, Patent, Tracing, Contracts, Payment Systems
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