Catch Me If You Can: Resolving Bitcoin Disputes with Class Actions
Canadian Class Action Review, Vol. 15, No. 1, 2019
30 Pages Posted: 31 May 2019 Last revised: 20 Aug 2019
Date Written: July 26, 2018
In the last decade, a new kind of financial technology or “fintech” has emerged, bringing with it a host of legal issues. The most commonly known cryptocurrency, Bitcoin, is touted as the alternative to traditional money systems. Dozens of exchanges have emerged that can be used to store and transfer Bitcoins between virtual wallets. However, these exchanges are prone to being hacked, and without the infrastructure to back the ‘currency’, users have frequently lost their Bitcoins to virtual thieves and been unable to recover their losses.
This paper argues that class actions are an effective avenue for remedy against an exchange that has negligently lost Bitcoins. It provides a brief overview of Bitcoin’s underlying technology, the blockchain on which transactions are recorded, and the exchanges out of which they operate. Canadian class actions law is examined in the context of Bitcoin hacks to demonstrate how large-scale litigation can play an increasing role in fintech. There are many examples of cyber attack theft where class actions are the only viable means to achieve a remedy, given the commonality of harm, enormous aggregate losses, and lack of other recourse in an unregulated and uninsured industry. There are also inherent enforcement challenges that need to be addressed by regulators, such as jurisdiction conflict and party anonymity. New technology is constantly emerging and difficult to legally classify. Nevertheless, the paper concludes that class action law is the best means of protecting consumer interests against fintech risks, supporting the objectives of access to justice, judicial economy, and behavior modification.
Keywords: Bitcoin, fintech, blockchain, class action, negligence, regulation, insurance
JEL Classification: K13, K22, K42
Suggested Citation: Suggested Citation