THE MOMENT OF ACQUISITION OF OWNERSHIP OF CRYPTOCURRENCY UNDER A CIVIL LAW CONTRACT

Abstract

The authors examine the issue of determining the moment of transfer of ownership of virtual assets under a civil-law contract through the lens of the tradition of Ukrainian private law, the specific nature of virtual assets as objects of civil rights, and the provisions of current legislation. This matter is particularly relevant given the absence of legislatively established special rules governing the legal regime of virtual assets and the lack of comprehensive domestic scholarly research on the subject. The study establishes that the moment of transfer of ownership of virtual assets is linked to the moment they are definitively associated with the acquirer’s public address, as a result of which the virtual assets become available for use and disposition through the private key.The analysis further leads to the conclusion that the approach under which the transfer of ownership of virtual assets is deemed to occur prior to the actual “transfer” of the virtual asset is inappropriate. In such a scenario, the acquirer would be unable to exercise his proprietary rights in respect of certain categories of virtual assets; would possess significantly limited legal instruments for the protection of his rights, including the recovery of a virtual asset in the event of the transferor’s refusal to perform the transfer; and the blockchain technology would fail to fulfil one of its foundational purposes – eliminating the need for trust.The examination of the issue also made it possible to identify circumstances in which the technological characteristics of virtual assets complicate the determination of the moment of transfer of ownership. This is particularly relevant where the acquirer, who independently stores his private cryptographic keys, loses the seed phrase, which automatically results in the loss of the ability to exercise the powers of the owner with respect to digital possession, use, and disposition of virtual assets, despite the fact that all legally significant actions aimed at acquiring ownership (concluding a contract that reflects the parties’ will, transferring the virtual asset, and ensuring the receipt of counter-performance) may have been duly performed by both parties to the transaction.