Taking a Byte out of Bitcoin

Taking a Byte out of Bitcoin

A recent California federal district court case, Entrepreneur Media, Inc. v. Smith, does not seem very noteworthy at first glance, and for the most part it isn’t. Entrepreneur Media (EMI) won a judgment against the defendant in a straightforward case of trademark infringement. In attempting to collect on that judgment, however, we see an important emerging trend. As pointed out in Jeff Steinport’s legal blog, EMI sent several documents as part of a discovery request to locate the defendant’s assets in order to collect on the judgment, but one section stands out by requesting documents “which show… acquisition and use of any online digital banking services, such as Bitcoin.”

Adding Bitcoin to the standard list of monetary assets to be appraised in collecting judgment represents a paradigm shift in the way the law sees this upstart currency. Unlike standard currencies the world over, Bitcoin is not controlled by any government, organization, or individual. Instead, it is a decentralized currency with strict rules for distribution based on math and cryptography, and it exists only in digital form. As such, it has taken a few years to be seen as legitimate. With the shutdown of Silk Road, a website designed to facilitate black market deals that only accepted Bitcoin because of the currency’s anonymous nature, the currency has proven stronger than ever. Its uses go far beyond illicit internet drug deals; in fact, a single Bitcoin today goes for almost $1,100.

While the legal world can often be slow to adapt to new technology, lawyers are beginning to see that they cannot ignore Bitcoin. Despite its digital nature, hard drives containing Bitcoins can still be seized by law enforcement or handed over in summary judgment, much like any other currency. Ignoring this ever-more-popular currency would be unwise for attorneys looking to seize assets in judgment. The more than 12 million bitcoins currently in circulation are now worth over $13 billion, and if trends continue those numbers will only continue to grow.

Just how revolutionary this development will be remains to be seen, but the potential for hiding assets using Bitcoin is great. Requests for Bitcoin information as a part of discovery are becoming standard, and it would be wise to keep a close eye on how the courts suggest we go about locating, seizing and producing this new type of asset.

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