The Legal Risks Associated with the Electronic Transactions of Cryptocurrencies
Dr. Mohammad Alhihi
Associate Professor – Private Law – Kuwait International Law School – Australia
With the massive use of modern communication technology in national and international trade a new form of application has emerged which is the development of a new type of nonphysical currency called digital currency or cryptocurrencies. The best recognized types of new currencies are the Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), and Ripple (XRP).
Cryptocurrency involves a special form of electronic program where this currency is generated and its owner has an account with a special secret encryption. This currency is based on encryption techniques which regulate the generation of its units and verify the transfer of funds. Furthermore, this digital currency so far has no central issuing or regulating authority and instead uses a decentralized system to record transactions and relies on cryptography to prevent counterfeit and fraudulent transactions. The most sophisticated programming and decentralized system used to control the generation and control the transfer and manage the data of such currency called Blockchain technology. The decentralized solution does not require any third party to act as a mediator. The information about every transaction ever completed in Blockchain is shared with and available to all related parties.
Despite the existences of many types of Cryptocurrency and their trading in the stock exchange market, countries still vary in their official stands on it. Some countries clearly illegalized the trade in Cryptocurrency, some countries so far did not make a clear decision, and some countries indirectly accept the development of this digital currency and do not oppose transactions of Cryptocurrency. Furthermore, some countries such as Saudi Arabia and the United Arab Emirates have reached an agreement over developing their form of Cryptocurrency. Essentially, this would be used between them as an alternative to traditional money to settle their mutual trade transactions.
The aim of this paper is to discuss the legal risks associated with the electronic transitions of Cryptocurrency. One major risk is related to the nature of this type of currency and ways of generating its units. Essentially, the currency does not have a physical existence in order to be held or transferred physically between trade parties and that is problematic. The other risk stems from the decentralization of the technology that is being used in generating the units of this currency as well as controlling the related deals, without the interference of their party of controlling such sophisticated operations. Another major risk is related to the burden of proof of the ownership in the case of cyber-attack or system failure. In addition, there are other issues and questions that need to be explained and answered. One is whether it is possible to develop a banking system and laws to open accounts for Cryptocurrency and accept payment with digital currency as alternative; and the other is whether Cryptocurrency is going to replace tradition money in the financial sector.
CV / Resume
Name: Dr. Mohammad Alhihi
Education and Qualifications:
- 2010: PhD in law, (Trade and business law),School of Law, Macquarie University- Sydney Australia.
- 2005: Master degree (LLM) in international trade and business law, (by course work, research projects), University of Western Sydney (UWS)-Australia.
- 1999: LLM in civil Law, (by course work, research projects, and a substantial thesis component), La Sagesse University (Higher Law Institute)-Lebanon.
- 1995/1996: Bachelor Degree in Law, Beirut Arab University-Lebanon.
- September 2017 till now, full time Ass/Prof Kuwait international Law College (Kilaw), Kuwait.
- August 2016-Agust 2017full time Ass/Prof Al Zahra College, Oman
- Second semester 2015/2016, full time visiting assistant professor Sultan Qaboos University, Oman
- Summer semester 2015, full time visiting assistant professor Sultan Qaboos University, Oman
- September 2012 –October 2015(full time, three years) assistant professor- Isra University- Jordan
A number of articles, including:
- “Civil Liability for negligence in Omani Civil law, comparative study with the rules of civil liability in the Jordanian civil law” under publication process
- “Globalization and International Trade: Trade protection through non-tariff barriers” Conference proceeding Jordan University and the WTO Chair Program 2014.
- “Civil Liability in nuclear legislation and its application in Jordan”
A comparative study of the rules of civil liability in the Jordanian civil law and the provisions of the Vienna Convention of 1963on Civil Liability for Nuclear Damage” European Journal of Social Sciences 2014
- “Escape clauses under WTO: complementary or contradictory to the liberalization of international trade in goods”, Rutledge, 2011.
- Arabic, English.