97 N.C. L. Rev. 395 (2019)
It is estimated that, since its inception, over 980,000 Bitcoins have been lost through unauthorized takings, mostly individual accounts located on major Bitcoin exchanges. This loss represents an amount over $3.5 billion, and most of these losses have occurred within the last four years. When such losses occur, the media often reports them in terms of theft. This reaction implies a general understanding, without analysis, that such a taking is legally theft—that is, the taking of a thing (Bitcoin) belonging to someone else that society recognizes as an action deserving punishment. This framing generally mirrors the response by victims of Bitcoin theft.
While some individuals simply accept this risk of loss as an inevitable result of participating in the Bitcoin market, a growing number are complaining to regulatory agencies about the problem. This uptick in complaints is due in part to the rapid increase in losses attributed to Bitcoin theft, and the fact that once a Bitcoin is stolen, it is unlikely that the lost Bitcoin will ever be recovered. In a normative sense, however, this reaction demonstrates the general proposition that victims of unauthorized takings expect protection and redress from the traditional source: the government. Public perception, as alluded to above, further supports this normative view. Yet, as a prominent member of the Bitcoin community candidly admits, “no one has gone to jail for electronically pilfering cryptocurrencies.”
With blockchain’s increasing prevalence and the promising potential of its widespread application, now is the time for prosecutors to act. Not only would prosecution of cryptotheft reinforce rule-of-law values, but it would also address societal expectations that unauthorized takings of blockchain-based assets are what they appear to be—theft. Such prosecutions would achieve the critical objectives of regulatory schemes—fostering trust in blockchain-based assets and a safe playing field for innovation—in a way that would be less onerous to developing blockchain’s uses across industries. By targeting the bad actors, as opposed to regulating technology’s operation, blockchain developers will retain the freedom to continue developing the technology without sacrificing other important societal goals and values.
This Comment argues that prosecutors already have the tools necessary to confront this rise in theft. To lay the foundation of the law of theft, Part I highlights the technical aspects of blockchain protocol and Bitcoin that are relevant to this discussion. Tracing blockchain’s development explains in part the early—often contradictory—efforts to define Bitcoin. It is also crucial to understanding why Bitcoin is best understood as property, which in turn clarifies the operation of the most common instances of theft from online exchanges. Part II then defines Bitcoin. Part III addresses the shortcomings of the most applicable federal theft statutes, the National Stolen Property Act and Computer Fraud and Abuse Act, when applied to theft of Bitcoin. It then proposes that the Wire Fraud provision is a critical stop-gap measure for deterring such theft that serves both to protect individuals’ interest in Bitcoin and the future development of blockchain protocol. Lastly, Part IV argues that prosecutors should move to enforce these provisions, while noting the social and economic realities of enforcement. It raises questions that Congress, government regulators, and the Bitcoin community should consider when searching for an equitable solution to this pervasive risk.