Professional Documents
Culture Documents
Volume 9
2015
Hong Kong Journal of Legal Studies
Address: Room 403, Cheng Yu Tung Tower, Centennial Campus, The University
of Hong Kong, Pokfulam Road, Hong Kong
Email: hkjls@hku.hk
Website: http://www.law.hku.hk/hkjls/
Preface iii
Arthur Chan
Matthew P. Ponsford
Emily Ling
Josephine Wong
Tze Chi Ho
FOREWORD
The lawyer has two skills - the spoken word and the written
word. Of the written word, the crown jewel of legal academia is the law
journal article. Good articles identify a real societal problem, describe
how the existing law governs the area, and then provide suggestions on
how the law should be developed or reformed to deal better with the
problem. Great articles do all that so well that the collective conscience is
stirred and legislatures and judges are spurred on to effect the desired
changes. Often the real world effects of academic articles are not direct.
Yet they push new ideas and perspectives into the marketplace of
knowledge, only to be taken from the shelf sometime in the future when
it’s time has come.
Since 1994 the student body of the Law Faculty of the University
of Hong Kong has worked to produce an annual issue of the Hong Kong
Journal of Legal Studies, a journal run and written by students, and a
publication which has become a provider of good and great articles to
Hong Kong and to the world. In this 2015 issue, you will find
contemporary and pressing problems and cutting edge perspectives - from
regulation of virtual currencies to the enforcement of socio-economic
rights, and from a semantic analysis of the Umbrella Movement to the
case for the televising of court proceedings. Exciting stuff. Enjoy!
i
PREFACE
The Journal started off under the name of the Hong Kong
Student Law Review, and has remained the only academic law journal
fully edited, managed and published by students in Hong Kong. Since its
establishment, the Journal has provided a platform for law students to
present their academic research endeavours and discuss legal issues in a
professional manner.
Serving as an editor for the past years and judging from the
article submissions we have received, we observe that there is a trend of
the broadening of legal interest among law students, and their growing
awareness in multi-jurisdictional and global issues. Although this volume
is not a particularly thick one, it covers topics which are most current and
inspiring, including: the Umbrella Movement; Bitcoin regulation;
Quistclose trusts; the protection of socio-economic rights in South Africa;
the right to social welfare in Hong Kong; and the televising of court
proceedings.
We take this opportunity to thank all who have made this volume
a huge success.
iii
We would also like to thank all past authors for their contribution
to the Journal and their consent for allowing the articles to be placed on
HeinOnline, the world’s largest image-based legal research database. This
surely boosts the readership base of the Journal, and is a milestone for the
Journal in the digital era.
Editors-in-Chief
iv
A Comparative Analysis of Bitcoin and Other DVCs 29
Matthew P. Ponsford*
INTRODUCTION
Bitcoin, also known as a decentralized virtual currency (DVC), 1 is
regulated differently in the People’s Republic of China (PRC), Canada,
and the United States, and represents a vastly underdeveloped area of the
law. No country has currently backed Bitcoin. Launched in 2009, and
founded by Satoshi Nakamoto,2 Bitcoin is a ‘decentralized peer-to-peer
virtual currency.’3 Other virtual currencies include Litecoin, Namecoin,
Auroracoin, Peercoin, and Dogecoin – about 500 varieties in total – but
this research study primarily focuses on Bitcoin.4
5
Carolyn Wilkins, ‘Money in a Digital World’ (Speech delivered by the Senior
Deputy Governor of the Bank of Canada at Wilfrid Laurier University, Waterloo,
Ontario, 13 November 2014) <http://news.gc.ca/web/article-en.do?nid=904419>
accessed 18 May 2015.
32 Hong Kong Journal of Legal Studies (2015) Vol 9
6
ibid.
7
Vincent (n 3).
8
Sandra Appel, ‘Can you take a security interest in bitcoin?’ (Davis LLP Banking &
Financial Services Bulletin, 7 May 2014)
<www.dlapiper.com/en/canada/insights/publications/2014/05/can-you-take-a-
security-interest-in-bitcoin/> accessed 18 May 2015.
9
Vincent (n 3).
10
Hill (n 2) 30-33.
11
USGAO Report 2014 (n 4) 9.
12
Appel (n 8) 1.
13
Armina Ligaya, ‘After Alberta’s Flexcoin, Mt. Gox hacked, bitcoin businesses face
sting of free-wheeling ways’ (Financial Post, 5 March 2014)
<http://business.financialpost.com/2014/03/05/after-albertas-flexcoin-mt-gox-
hacked-bitcoin-businesses-face-sting-of-free-wheeling-ways> accessed 18 May
2015.
A Comparative Analysis of Bitcoin and Other DVCs 33
14
USGAO Report 2014 (n 4) 1.
15
ibid 6.
16
ibid.
17
ibid 11.
18
Hill (n 2) 10.
19
ibid 21.
34 Hong Kong Journal of Legal Studies (2015) Vol 9
fraudulent activity as per credit and debit cards); and (3) volatile prices of
virtual currencies.
20
US Securities and Exchange Commission, ‘Investor Alert: Bitcoin and Other
Virtual Currency-Related Investments’ (7 May 2014) <http://investor.gov/news-
alerts/investor-alerts/investor-alert-bitcoin-other-virtual-currency-related-
investments#.VHrRTqSUdAh> accessed 18 May 2015.
21
USGAO Report 2014 (n 4) 29.
22
Jim Bronskill, ‘Internal Finance memo warns of potential for Bitcoin related crime’
(Investment Executive, 29 July 2014) <www.investmentexecutive.com/-/internal-
finance-memo-warns-of-potential-for-bitcoin-related-crime> accessed 18 May
2015.
23
ibid.
24
Wilkins (n 5).
A Comparative Analysis of Bitcoin and Other DVCs 35
25
Andrew B Macurak, ‘Regulating Bitcoin’ (1 April 2014) 20-21
<www.abastonier.com/stonier/wp-content/uploads/2014-Macurak-Andrew.pdf>
accessed 18 May 2015.
26
Cook (n 1) 560-561.
27
Wu Yiyao and Gao Changxin, ‘Banks not allowed to use Bitcoin’ (China Daily
USA, 5 December 2013) <http://usa.chinadaily.com.cn/business/2013-
12/05/content_17157648.htm> accessed 18 May 2015.
28
Cook (n 1) 560-561.
36 Hong Kong Journal of Legal Studies (2015) Vol 9
29
ibid.
30
ibid 565.
31
Hill (n 2) 29.
32
ibid 37-38.
33
ibid 38.
34
PH Farmer Jr, ‘Speculative Tech: The Bitcoin Legal Quagmire & the Need for
Legal Innovation’ (2014) 9(1) Journal of Business & Technology Law 85, 104-105.
35
Ladislav Kristoufek, ‘What are the main drivers of the Bitcoin price? Evidence
from wavelet coherence analysis’ (2014) Institute of Economic Studies 11
<http://arxiv.org/pdf/1406.0268v1.pdf> accessed 18 May 2015.
36
Farmer (n 34) 105.
A Comparative Analysis of Bitcoin and Other DVCs 37
41
ibid.
42
ibid.
43
Armand Tanzarian, ‘Legal Basics: Bitcoin in China’ (CoinTelegraph, 10 June
2014) <http://cointelegraph.com/news/111753/legal_basics_bitcoin_in_china>
accessed 18 May 2015.
A Comparative Analysis of Bitcoin and Other DVCs 39
44
BTC China, ‘The People’s Bank of China and Five Associated Ministries Notice:
“Prevention of Risks Associated with Bitcoin”’ Bank Notice [2013] No 289 (3
December 2013) <https://vip.btcchina.com/page/bocnotice2013> accessed 18 May
2015.
45
ibid. The Notice also instructed: ‘In order to prevent the use of Bitcoin and other
“virtual currencies” for use in excessive speculation, posing a risk to the public
interest and the legal status of the Renminbi, “Notice” requires that financial
institutions and payment institutions should, in their daily work, employ the concept
of proper money, focus on strengthening public knowledge of currency, maintain a
proper understanding of currency and of virtual goods and commodities, practice
rational investment, reasonably limit investment risk, safeguard individual property,
and other concepts included in financial literacy activities, and guide the public to
establish a firm understanding of concepts related to currencies and investment.’
46
ibid.
47
Turpin (n 37) 367.
40 Hong Kong Journal of Legal Studies (2015) Vol 9
54
Bill C-31, An Act to Implement Certain Provisions of the Budget Tabled in
Parliament on February 11, 2014 and Other Measures, 2nd Session, 41st
Parliament, 2014 (assented to 19 June 2014).
55
ibid Summary, Part 6, Division 19.
56
ibid s 244.7(4)(a)(iv).
57
ibid ss 256(2)(iv), 294(3).
A Comparative Analysis of Bitcoin and Other DVCs 43
58
SEC v Shavers, No 4:13-CV-416, 2013 US Dist. LEXIS 110018, 5 (E.D. Tex. 6
August 2013).
59
Internal Revenue Service, ‘IRS Virtual Currency Guidance: Virtual Currency Is
Treated as Property for US Federal Tax Purposes; General Rules for Property
Transactions Apply’ (25 March 2014)
<www.irs.gov/uac/Newsroom/IRS-Virtual-Currency-Guidance> accessed 18 May
2015.
60
Cook (n 1) 557-558.
44 Hong Kong Journal of Legal Studies (2015) Vol 9
Although music and file sharing services have now utilized the
decentralized system post-Napster, a large crackdown ensued and the
most egregious copyright infringers have been prosecuted. Press releases
were also issued to deter illegal behaviour. A similar approach could be
implemented for Bitcoin by investigating intermediaries that facilitate
Bitcoin payment transfers and exchanges despite the absence of a central
authority.66 However, in order for this to be feasible, the US needs to
establish consensus on what constitutes a decentralized virtual currency.
A clear definition should be constructed in order to enforce the ban
through one of the federal agencies.67 In the interim, the US government
has stated those engaging in Bitcoin transactions must comply with the
US Bank Secrecy Act, 1970 (BSA),68 the country’s anti-money laundering
legislation. Similar to Canada’s FINTRAC registration requirements, the
Financial Crimes Enforcement Network (FinCEN) 69 has issued an
interpretive guidance, clarifying the applicability of the BSA to money-
services businesses.70
66
ibid 563-564.
67
ibid 564.
68
Bank Secrecy Act, 1970, 31 USC 310.
69
US Treasury Department, ‘Application of FinCEN’s Regulations to Persons
Administering, Exchanging, or Using Virtual Currencies’ (18 March 2013)
<www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html> accessed 18
May 2015.
70
Hill (n 2) 27-28.
71
Lawrence Trautman, ‘Virtual Currencies: Bitcoin and What Now After Liberty
Reserve, Silk Road, and Mt. Gox?’ (2014) 20 Rich JL & Tech 13, 16.
72
Stephen Middlebrook and Sarah Jane Hughes, ‘Regulating Cryptocurrencies in the
United States: Current Issues and Future Directions’ (2014) 40(2) Wm Mitchell L
Rev 813, 816.
73
Matthew Kien-Meng Ly, ‘Coining Bitcoin’s “Legal-Bits”: Examining the
Regulatory Framework for Bitcoin and Virtual Currencies’ (2014) 27 Harv JL &
Tech 587, 605.
46 Hong Kong Journal of Legal Studies (2015) Vol 9
helps combat other crimes associated with DVCs across a number of state
and federal government departments, and international law enforcement
agencies.74
74
Trautman (n 71) 29-31.
75
Farmer (n 34) 96.
76
Myles Martin, ‘Alternative Disposition of Advisory Opinion Request 2013-15
(Conservative Action Fund)’ (Federal Election Commission, 25 November 2013)
<www.fec.gov/pages/fecrecord/2013/december/aor2013-15.shtml> accessed 18
May 2015.
77
Julian Hattem, ‘FEC allows bitcoins in campaigns’ (The Hill, 8 May 2014)
<http://thehill.com/policy/technology/205611-fec-allows-bitcoins-in-campaigns>
accessed 18 May 2015.
78
See also Federal Election Commission, ‘AO 2014-02 (Make Your Laws PAC) –
Draft C’ (7 May 2014), 5 <www.fec.gov/agenda/2014/documents/mtgdoc_14-24-
b.pdf> accessed 18 May 2015.
79
ibid.
80
Hattem (n 77).
A Comparative Analysis of Bitcoin and Other DVCs 47
81
Bill C-31 (n 54).
82
Christine Duhaime, ‘Canada implements world’s first national digital currency law;
regulates new financial technology transactions’ (Duhaime Law, 22 June 2014)
<www.duhaimelaw.com/2014/06/22/canada-implements-worlds-first-national-
bitcoin-law> accessed 18 May 2015.
83
Jared Kleiman, ‘Beyond the Silk Road: Unregulated Decentralized Virtual
Currencies Continue to Endanger US National Security and Welfare’ (2013) 4(1)
American University National Security Law Brief 59, 74.
84
ibid 74-75.
48 Hong Kong Journal of Legal Studies (2015) Vol 9
85
Joel Reidenberg, ‘Technology and Internet Jurisdiction’ (2005) 153 U Pa L Rev
1951.
86
ibid 1961-62.
87
Pflaum and Hateley (n 63) 1195-96.
88
ibid 1197.
89
Niels Vandezande, ‘Between Bitcoins and mobile payments: will the European
Commission’s new proposal provide more legal certainty?’ (2014) 22 Int’l JL &
Info Tech 295.
90
Pflaum and Hateley (n 63) 1200.
A Comparative Analysis of Bitcoin and Other DVCs 49
91
Vandezande (n 89) 307.
92
Pflaum and Hateley (n 63) 1200-01.
93
Middlebrook and Hughes (n 72) 847.
94
Thomas Slattery, ‘Taking A Bit out of Crime: Bitcoin and Cross-Border Tax
Evasion’ (2014) 39 Brook J Int’l L 829, 857-860.
95
Pflaum and Hateley (n 63) 1215.
96
Jonathan Zittrain, ‘The Generative Internet’ (2006) 119 Harv L Rev 1974, 1979.
50 Hong Kong Journal of Legal Studies (2015) Vol 9
97
Turpin (n 37) 367.
98
Williams James, ‘Britain eyes regulation for virtual currencies’ (Reuters, 6 August
2014) <http://uk.reuters.com/article/2014/08/06/uk-britain-banking-osborne-
idUKKBN0G52J120140806> accessed 18 May 2015.
99
Kleiman (n 83).
100
Danton Bryans, ‘Bitcoin and Money Laundering: Mining for an Effective Solution’
(2014) 89 Ind LJ 441, 447, 455-463.
101
Trautman (n 71) 83-84.