The founder of Bitcoin has been confirmed (by his own confession) as Craig Steven Wright, an Australian academic.
In a post published on his website, Mr Wright outed himself as Satoshi Nakomoto by providing cryptographic proof that he owned the ‘key’ corresponding to the transaction identifier of the first Bitcoin transfer. Whilst speculation remains, some within the community believe he has provided sufficient evidence to prove Satoshi Nakamoto’s identity.
If Mr Wright is Bitcoin’s creator, there is hope that he will work with the Bitcoin community to remove some of the inefficiencies which limit Bitcoin’s future as a cryptocurrency and the potential commercial use of its blockchain.
Whether or not that is the case, there continues to be intense interest, even at a central bank level, on the opportunities and risks brought by digital currencies and the underlying blockchain (distributed ledger).
Digital currencies are a vehicle for innovation in the payment systems market. Blockchain technology has been identified by banks, securities exchanges and others as a key part of that efficiency drive. This will continue to be a source of disruption to existing business models, no matter what happens to Bitcoin.
Digital currencies remain controversial because, to date, their creation has not been controlled by central banks, however they display features of early payment systems in that they allow payments to be made directly between parties without passing through a centralised intermediary, such as a commercial or central bank. The most controversial feature of current digital currencies is that they do not require users to disclose either their true identity, or the holdings of digital currency they control. This raises concerns about the use to which they might be put. Digital currencies therefore approach the feature of anonymity of banknotes, but with a deliberately global reach.
From our perspective however, the real question is what regulatory controls should be imposed on the use of digital currencies. A number of law reform bodies are actively considering legislative and regulatory controls, dealing with anti-money laundering, the neutrality of regulatory controls over payment services, and consumer protection. On the flipside however, other regulatory bodies such as the British government are exploring potential applications of blockchain technology in the existing regulatory environment.
Regardless of Satoshi Nakamoto’s identity, it is clear that digital currencies and the underlying blockchain technology are here to stay.
For information regarding possible implications for your business, contact Don Robertson.
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2019