One of the most interesting phenomenon of 2017 was the rise in popularity of cryptocurrencies such as Bitcoin and Ethereum. Cryptocurrencies are a modern day construct, generated by computers running computationally intense algorithms, in an attempt to “mine” coins. Once these coins are mined, they are added to a digital wallet, that is global proof of ownership of said coins. Mining is required to generate coins, since like natural resources (such as diamonds), there are a limited supply, and they must be mined to be used. They are not issued by any regulating body. Due to the nature of cryptocurrencies, transactions are anonymous, non-reversible, global, and unregulated. These features make cryptocurrencies attractive for international trades, or trades that are intended to bypass the scrutiny of governmental or international oversight.
Dealing with cryptocurrencies comes with risk. According to the Financial Consumer Agency of Canada, cryptocurrencies are not supported by the government, or any centralized authority such as the Bank of Canada.1
Since cryptocurrencies are unregulated and are not considered legal tender, users are not afforded protections as they would be with legal tender (such as the Financial Administration Act),2 or securities (as in the provincially implemented securities acts). Since cryptocurrencies are not legal tender, remedies for wrongdoings may result in the assertion of property rights (through civil action), or criminal charges. Here is a simple example to outline some of the issues faced when cryptocurrencies come up in the law:
Frank is a cryptocurrency user, and has a digital wallet on a company owned laptop that contains approximately $1000 worth of bitcoins. While Frank is in his office, and is not looking, Bob (a coworker) inserts a USB key into Frank’s laptop, with the intent to steal Frank’s digital wallet. Bob copies the wallet onto the USB key, and removes the key from Frank’s computer, and leaves the office building, with the USB key in hand.
Has an offence under the Criminal Code of Canada been committed?
According to the Criminal Code of Canada:
322 (1) Every one commits theft who fraudulently and without colour of right takes, or fraudulently and without colour of right converts to his use or to the use of another person, anything, whether animate or inanimate, with intent
(a) to deprive, temporarily or absolutely, the owner of it, or a person who has a special property or interest in it, of the thing or of his property or interest in it.3
If Bob had deleted the original wallet on Frank’s computer, his actions would clearly be considered theft, as Frank would be deprived of said digital wallet. Similar to removing bills from Frank’s actual wallet, theft would be easy to prove. However, Bob did not delete the original wallet, he just made a copy. Theft requires taking possession of something without right, or to dispossess another without right. In this case, Frank still has full possession of the digital wallet. It is still on his computer, exactly as he left it.
If Bob goes home, and uses the copied wallet to make purchases, and spends all of the bitcoins contained within, Frank’s copy of the digital wallet becomes “out of date” and is useless, because Bob used the digital coins. In this case, the digital wallet has been converted, and theft is now applicable due to the reference of conversion in the section.
If Bob never uses the wallet, it is conceivable that charges of theft cannot be laid. At no point has Bob “taken” anything from Frank, or prevented Frank from using his wallet as normal. It is only once Bob uses the wallet (to make an anonymous, non-reversible, international payment), that the charge of theft can apply. Due to this, Bob in our example had committed no crime when he left the office building. Is this acceptable in our modern society, where the concept of cryptocurrencies or other digital means of payment will (most likely) become more widespread in use?
This sort of situation is a problem because by the time the actual theft occurs, the transaction is untraceable, and anonymous. This makes recovery extremely difficult, if not impossible. Another issue with this situation is that the Criminal Code of Canada assumes that the criminal offence of theft and the action of wrongdoing (the actual theft) occur at the same time and place, which is not true when digital computers are involved. Interestingly, Bob did not physically have to be in the office to achieve the same result. Bob could have logged into the company computer remotely, and never set foot in the office.
Due to the obvious increase in popularity of cryptocurrencies, and the unique situations that can be created by them, the Code should be amended to reference the concept of digital copying. A subsection (6) in section 322 could read:
322 (6) Every one commits theft who fraudulently and without colour of right digitally duplicates or digitally copies anything, with intent to deprive the owner of its use.
This would have the effect of allowing the charge of theft be applied to digital wrongdoings, without requiring conversion or possession changes to occur. The Canadian Criminal Code does have a section for mischief in relation to computer data, but unfortunately this only outlines destruction, or prevention of use. It does not have any sections that deal with unauthorized duplication of computer data. This section should also be modernized and clarified to bring the cyber-based offences in line with physical counterparts. The clause about intent to deprive would differentiate this potential offence from piracy, in which the intent is not to deprive.
1 “Digital Currency”, Government of Canada, online: <https://www.canada.ca/en/financial-consumer-agency/services/payment/digital-currency.html>.
2 Financial Administration Act, RSC 1985, c F-11.
3 Criminal Code, RSC 1985, c C-46, s 322 (1)(a).