One Day, the Law Might Protect Illegitimate Ethereum Transactions

Part of the beauty of blockchain transactions is that once a payment is made, it’s done. This isn’t always a good thing, however, in some cases, this means accidental and illegitimate transactions aren’t protected - take this scenario for example; if you transfer Ethereum to the wrong address by mistake, the wallet you have transferred it to does not actually have to pay you back.

Within traditional banking, such payments are protected and means exist that allow users to reclaim money from illegitimate transactions. Yes, it may be a lengthy process but the fact that processes are in place means that users of traditional banking services are protected.

The University of Oxford’s Law School has recently published a blog post titled; Cryptocurrency Transactions: Immutable but not Irreparable that discusses how in the future, current regulations might be adapted to also protect this area within cryptocurrencies, though thanks to anonymity and decentralisation, this may be easier said than done.

According to the post:

“It is infeasible to reverse a single transaction, even if there were valid reasons to do so. However, it is frequently overlooked that blockchain transactions (including those relative to cryptocurrency), apart from the digital rules (code), are governed by law. Therefore, while a cryptocurrency transaction cannot usually be changed in the ledger, the outcome of the transaction, what matters at the end of the day, can be modified through legal recourse.”

The post refers to a recent legal battle between Copytrack Pte Ltd and Mr. Wall, a case that took place in Canada, which eventually led to the court deciding that an illegitimate Ethereum transaction should be refunded to the defendant.

In this case, Mr. Wall was accidentally transferred 530 ETH after participating in an ICO. He was actually supposed to receive a payment of 530 CPY, the native token to the Copytrack platform, however, Copytrack accidentally made the transaction in Ethereum, meaning Mr. Wall an awful lot more money than expected.

Then, according to the post:

“The mistake was immediately discovered, and Mr. Wall was asked to return the Ether Tokens. At first, Mr. Wall declined to return them and transferred the Ether Tokens to a cryptocurrency exchange; but he finally agreed to send them back to the start-up, and withdrew the tokens back from the cryptocurrency exchange to his private wallet. However, soon after that, he claimed that his wallet had been hacked, and the Ether Tokens stolen. Three months later, just a few days after the hearings began, he passed away.”

The post then concludes that the court:

“Decided to grant summary judgment, as there would be no practical utility in sending this matter to trial given Wall’s death. The court confined itself to the fact that Ether Tokens were the property of the plaintiff, and they should rightfully be returned to it.”

This is important, as the court has had to adapt current legislation in order to recognise cryptocurrencies as an asset. The University of Oxford have touched upon this as this does suggest that worldwide, a framework is being developed (accidentally) that will allow for more legal definitions to be placed on cryptocurrencies in cases such as this one.

Indeed, this is only relative to this referenced case, however, the implications for this are quite big. One day, we could well see cryptocurrency payments protected by law too.