Japanese Court: Bitcoin Cannot be Owned

July 2016 Update

Bitcoin is coming of age in the Land of the Rising Sun. The Japanese
cabinet has approved a series of bills that legitimize virtual currencies
and promote FinTech even beyond that of other nations.

Responding to this nugget from Engadget:

Tokyo District CourtTokyo’s district court has ruled that it’s not possible for people to own bitcoin, and therefore they cannot sue for compensation in the wake of Mt. Gox’s collapse.

The ruling comes days after the head of the world’s largest bitcoin exchange was arrested on charges of fraud. Judge Masumi Kurachi felt that bitcoins do not possess “tangible qualities” to constitute owned property. Mt. Gox held thousands of individual accounts, and so there’s plenty of angry customers looking for compensation.

A Wild Duck Response to the Tokyo court…

A personal stake in Bitcoin is every bit as real (and a bit more tangible) than a personal stake in Yen, Dollars or Euros. Fiat currency is backed by the knowledge that your national government will demand tax payments in kind. But is it tangible? Like any invention of humans, that’s a matter of perception.

a) Dollars / Yen / Euros

Dollar_closeOver the long term, national currency is likely to be debased by debt, social welfare, war, political ambition, and a desire to redistribute fruits of labor, typically to assuage political ambitions. A built in mechanism of inflation forces a hidden tax and enables legislators to spend beyond the consent of their constituents.

b) Bitcoin

Bitcoin_BlueBitcoin on the other hand is backed by math. It is an asset without the potential for inflation or manipulation. It is a pure supply-demand currency and a pure 2-sided network—completely unfettered by the chaff that comes with central banks and national treasuries.

A stake in Bitcoin rises over the long haul, because the total quantity of currency is capped. As it is adopted for payments and commerce, a fixed pie is sliced thinner and thinner. This results in increased value per unit. Result: A deflationary economy without the baggage of sluggish economic.

Japan has made a foolish pronouncement; one that will ultimately embarrass their courts. Declaring Bitcoin ethereal is laughable when you consider that paper money is no more tangible than an unfulfilled promise. Likewise, declaring the theft or mismanagement of Bitcoin unworthy of recovery or restitution is no different than declaring the theft of art unworthy of restitution. Consider that each Mt. Gox account holder has proof of a real dollar investment position and an appreciation that is reported and tracked by exchanges all over the world.

Wake up Japan. You have so much more to offer the world than a distorted interpretation of a new technology.

Ellery Davies is Co-Chair of CRYPSA,
Cryptocurrency Standards Association

Slippery Slope: Japan seeks to ban Tor

The Electronic Freedom Foundation (EFF) often finds itself on the opposite side of legislation that is initiated or supported by media rights owners. In fact, the Recording Industry Association of America (RIAA) and its Hollywood counterpart, the Motion Picture Association of America (MPAA) have thwarted every promising technology since the dawn of the photocopier and the 8-track tape cartridge.

We could list delayed technologies or those that were threatened with a use tax, such as the VCR, writable CDs, file sharing networks, and DVD backup software. But the funny thing about grumbling rights owners is that they are, well, right. Sort of. After all, anyone who believes that it is OK to download a movie with Bit Torrent or trade music with friends (while maintaining access in their own playlist) has a weak argument. They certainly can’t claim the moral high ground, unless they are the only person on earth that limits file copies to back ups and playlists in strict conformity to exceptions allowed under DMCA.

But this week, it isn’t the RIAA or MPAA that seeks to squash the natural evolution of the Internet. This time, it is the government of Japan. Japan?!!

Napster-ShawnFirst, some background…

In July 2001, Napster was forced to shut its servers by order of the US Ninth Circuit court. Despite legitimate uses for the service, the court agreed with a district court and the US Recording Industry Association (RIAA), that Napster encouraged and facilitated intellectual property theft—mostly music in that era.

The decision that halted Napster was directed at a specific company. Of course, it de-legitimized other file swapping services. (Who remembers Limewire, Kazaa, Bearshare or WinMX?) But, it was never intended to condemn the underlying technology. In fact, Napster was a pioneer in the emergence of ad hoc, peer-to-peer networks. It is the precursor of today’s Bit Torrent which merges distributed p2p storage with swarm technology to achieve phenomenal download speed and a robust, nearline storage medium. In fact, over the next few years, AWildDuck predicts that the big cloud services will migrate to a distributed p2p architecture.

Akamai has long used the power of distributed networks for storing data “at the fringe”, a technique that serves up web pages rapidly and reduces conserves network resources. But a similar network, grown organically and distributed among the masses strikes fear in the hearts of anyone who believes that power stems from identification and control.

In 2000 and 2001, p2p networks were perceived as a threat, because they facilitated the sharing of files that might be legally by few peers–or none at all. Today, p2p networks are fundamental to the distribution of files and updates and are at the very core of the Internet.

how_tor_works

Tor facilitates privacy. User identification is by choice.

Peer-to-peer networks are no more a tool of crime than telephones. Although both can be used for illegal purposes, no reasonable person advocates banning phones, and no one who understands the evolution and benefit of modern networks would advocate the regulation of peer-to-peer networks. (Please don’t add guns to this list. That issue has completely different considerations at play. With guns, there is a reasonable debate about widespread ownership, because few people use it as a tool for everyday activities and because safe use requires training).

But p2p networks are evolving. The robust, distributed nature is enhanced by distributing the tables that point to files. In newer models, users control the permissions as a membership criteria and not based on the individual source or content of files. For this reason, anonymity is a natural byproduct of technology refinement.

Consider the individual users of a p2p network. They are nodes in a massive and geographically distributed storage network. As both a source of data and also a repository for fragments from other data originators, they have no way to determine what is being stored on their drives or who created the data. Not knowing the packet details is a good thing for all parties—and not just to confound forensic analysis. It is a good thing every which way you evaluate a distributed network.*

The RE-Criminalization of P2P Networks

tor-crop

Japan’s National Police Agency (NPA) is much like America’s FBI. As a federal agency equipped with investigators, SWAT teams and forensic labs, their jurisdiction supersedes local authorities in criminal matters of national concern.

This weekend, the NPA became the first national agency in any country to call for a ban on the use of anonymous web surfing. They want Internet service providers to monitor and block attempts by their subscribers to use proxy servers that relay their internet traffic through remote servers, thereby anonymizing web traffic and even emboldening users to browse areas of the Internet that they might otherwise avoid.

But the Japanese NPA has a naïve and immature view of humanity. The use of proxy servers is not only fundamental to many legitimate purposes, many netizens consider web-surfing privacy to be a legitimate objective on its own merits. We could list a dozen non-controversial reasons for web surfing privacy—but if we had to do that, you probably wouldn’t be reading this page.

* The statement that anonymity and encryption is a good thing for distributed, p2p networks—not just for data thieves, but for all legal and business purposes—may not be self-evident to all readers. It will be the topic of a future discussion in this Blog.

Ellery Davies is an author, privacy consultant and cloud
storage architect. He is also editor at AWild Duck.com.