Introduction:
“Cryptocurrencies and trusts” is the recent scientific contribution written by attorney Massimo Giuliano, published in the July issue of the “Trusts and Fiduciary Activities” magazine, which we are publishing in this post with the kind permission of the magazine. Attorney Massimo Giuliano is a member of the Blockchain task force of the Ministry of Economic Development and has recently taken on the role of Chief Legal Strategic Officer at Affidaty S.p.A., working closely with the CEO, Dane Marciano, and the technology team led by Ing. Luca Vignali, the company’s CTO, to support them in all phases of the creation of solutions and products that require, from their design, to find the correct placement within the existing national and international regulatory framework.
Question 1
- Attorney Giuliano, in your essay, you examine the recent ruling of the High Court of New Zealand and specifically address the issue of the legal nature of cryptocurrencies. You speak of cryptocurrencies as “intangible things with polymorphic function”, what does that mean?” The digital society has given us a new range of non-material assets, made up of data and information which, with current technologies, such as those underlying cryptocurrencies, are made unique or, as it is said, rival, in the sense that the holder of that digital information can exclude everyone else from exploiting it.
This is a quality of material assets that was unthinkable for digital information before the advent of Bitcoin.
In the essay, I spoke of polymorphic function because cryptocurrencies, as digital information, can perform different functions and be a means of payment, financial product, if inserted into a more complex economic operation, and even an electronic document if it represents facts or data that have a certain legal relevance in a given legal system.
It makes no sense to state that “cryptocurrencies are…!” but always to specify that in the specific case, cryptocurrencies “behave as…”.
Question 2
- From the commentary on the ruling, it can be understood that cryptocurrencies should be considered, from a legal point of view, as fungible assets, such as money, as they lack their individuality. Can you explain this concept well?” In general, transferred cryptocurrencies, or those locked to a specific public key, for example, of the exchange entrusted with their conservation and management, lose their individuality, as they belong to the same genus and carry the same value.
In cases, therefore, of centralized management of cryptocurrencies by exchanges, as in the case decided by the New Zealand High Court, the cryptocurrencies of different users are not distinguishable, but this is not always the case.
With specific mathematical protocols, we can target cryptocurrencies – in the Bitcoin protocol, they are called colored coins – so that it is always possible to identify that unit of transferred cryptocurrency and demand its delivery (obviously, I am leaving aside the issues connected to the forced execution of such a request).
In other words, they are non-fungible cryptocurrencies, just like Non-Fungible Tokens (NFTs), which can represent a wide range of rights to “physical” goods or be digital assets themselves in every respect.
Affidaty has launched a solution for creating “typed” tokens, i.e., unique, programmable, and tamper-proof digital assets thanks to the computer protocols underlying the blockchain technology used.
Legal and regulatory management is of fundamental importance because technology and the skills of computer experts can create new assets and enable new services that the market is not always ready to receive from a regulatory point of view.
It is essential that the IT department and the legal department work closely together in order to provide the market with what it currently demands and is ready to receive, especially in light of the new regulatory framework currently being defined, which takes into account the new socio-economic paradigms that require a transversal understanding for their full comprehension.
Full essay “Cryptocurrency and Trust” by Lawyer Massimo Giuliano.
You can consult, download, and/or print the essay by clicking on the link below.
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