Property Rights in Cryptocurrencies: A Law and Economics Perspective

69 Pages Posted: 25 Feb 2020 Last revised: 18 Apr 2021

See all articles by Roee Sarel

Roee Sarel

Institute of Law and Economics, University of Hamburg

Date Written: February 21, 2020

Abstract

Can anyone really own virtual tokens such as Bitcoin and Ether? And if so, how should the law protect the rights of the owner? Legal rulings in federal courts have yielded inconsistent policies regarding the applicable remedy when rights in cryptocurrencies are infringed. Some adopt a property rule, granting injunctions and enforcement of property rights against third parties, whereas others restrict the remedy to damages. However, all rulings share one problematic feature: a lack
of distinction between types of tokens, resulting in an implicit one-size-fits-all policy. The economic analysis of law suggests that the choice between a property rule and a liability rule should depend on transaction costs, but such costs typically differ across cryptotokens, because tokens are diverse and customizable. Thus, this Article proposes to exploit the common taxonomy of cryptotokens, which distinguishes between security, utility, and currency tokens, as a proxy for
transaction costs.

Keywords: Cryptocurrencies, Blockchain, Property Law, Property Rights, Property Rules, Liability Rules, Law and Economics, Transaction Costs

JEL Classification: K11, K22, K24, D23

Suggested Citation

Sarel, Roee, Property Rights in Cryptocurrencies: A Law and Economics Perspective (February 21, 2020). North Carolina Journal of Law and Technology, Vol. 22, No. 3, 2021, Available at SSRN: https://ssrn.com/abstract=3542545 or http://dx.doi.org/10.2139/ssrn.3542545

Roee Sarel (Contact Author)

Institute of Law and Economics, University of Hamburg ( email )

Johnsallee 35
Hamburg, 20148
Germany

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