Epistemological reflection on the cryptocurrencies, and the legal questions erased by electronic sales in Burundi

In Burundi as elsewhere, information and communication technologies evolve in a highly increasing speed. That technological revolution based on the use of internet is employed today as an attracting means to fulfil different human activities, sale contracts for instance. Therefore, users of sales on line, natural persons like legal persons such as coinbase and Gdax, kraken Bittrex, Binance, CoinFalcon, amazon, Apple, Wasiri, beforward, Alibaba multiply more and more quickly using or without using crypto currencies as means of payment, or as an object of sale conventions.

In order to get on the same wavelength, we will divide this study into two parts. The first will describe the generalities on cryptocurrencies and the second will endeavor to raise the legal problems raised by the conventions born following the arrival of cryptocurrencies such as Bitcoin

Part 1: Generalties about cryptocurrencies

What is Bitcoin?

Bitcoin is a digital currency, a mean of exchange. The difference of Bitcoin and other currencies (FBU, USD, …) is the absence of an intermediary: John pays James, period. There is no bank or intermediary whatsoever to validate the transaction.

The creator of Bitcoin called himself Satoshi Nakamoto but is not known in the real world. Many people have claimed to be Satoshi but were later discovered to be frauds.

Craig Wright claimed to be Satoshi Nakamoto but he failed to prove it.

But the paper he wrote to introduce Bitcoin is still on the internet and everybody can read it at https://www.bitcoin.org. I read it. I didn’t understand much of what it says because of its high level of complexity but it’s the foundation Bitcoin.

Difference between Bitcoin and Cryptocurrency

The main difference is the word Cryptocurrency means the family of digital currencies when Bitcoin is one of the cryptocurrencies out there. It is of course the first and the most known of them. Other Cryptocurrencies are called Altcoins. In this article, we will talk about Bitcoin.

What solution does Bitcoin bring to the table?

Eliminate intermediaries

The financial system like it was back when Bitcoin was created, even today is based on trust. We pay through intermediaries. Bitcoin is by nature a trustless system. A network of computers validate the transactions by a mathematical mechanism of solving complex problems.

Reduce transaction costs

In a financial system based on fiat currency, when we need to transact electronically, we have to do it through financial institutions that act as intermediaries. Those charge fees for the service that can be high. Transaction fees on the Bitcoin network were programmed to be low because there is no company running operations behind that cost money and needs profit.

How does Bitcoin work?

Creation of Bitcoins

Unlike paper money (FBU, USD), Bitcoin is not printed. There is no central bank to make manage the creation and the distribution of Bitcoins. They are created through a mechanism called mining. Computers connected to the Bitcoin network validate transactions and are rewarded bitcoins in exchange of being constantly connected to the internet and validating ongoing transactions. The reward goes to the first computer to solve a mathematical problem. And that is the computer with the most computing power in the moment.

Bitcoin if said to be deflationist. That means the number of bitcoins to be created are known in advance. There will be in total 21 million bitcoins and this will happen in around the year 2140.

How are bitcoins stored

There is no wallet to carry out Bitcoins like this one on the image below.

There is no physical wallet for bitcoins. This is imagination

They are stored on a software and are protected by 2 keys. The first key is called public key and is used to get paid. Everyone can see it. The second one is private and is used to spend the bitcoins. It has to be kept secret because if someone other than the owner has access to it, he can spend the bitcoins that are in the wallet.

How are bitcoins spent

We can summarize the process of spending bitcoins by the following steps:

Seller provides an address (public key) to the buyer. Buyer enters the seller’s address and the amount of the payment to a transaction messageBuyer signs the transaction with a private key and announces the public key for verificationBuyer broadcasts the transaction to all the Bitcoin network

Is Bitcoin Money?

Or how do people use bitcoins in the real world? It is a very good question. Sadly, Bitcoin is not used for what it was meant to be used for when it was created: as a mean of payment. There are few businesses in the world that accept bitcoins as a way of payment. To my opinion, the first problem of accepting bitcoins for payment is its volatility. Because of speculation, people trade bitcoins against other currencies (Fiat and digital altogether) and bitcoin value is not stable. And companies can fear that an instable currency could harm their businesses.

Another way people use bitcoins is as an investment. They buy bitcoins and store them in the hope that they will become more valuable in the future. In conclusion, Bitcoin is far from what is was meant to be: a way of payment on the internet. But it is there, and it revolutionized the way we think and use money. Its influence on the financial system and other fields will certainly be profound.

Part 2. Legal problems posed by electronic sales

It would be superfluous to continue our reasonning without taking into consideration the inspiration of the articles number 263 and 264 of the civil code book III in force in Burundi for a better understanding of our main concerns.

In fact, the article 263 of the code mentioned above stipulates that:

“The sale is a convention by which one person obliges him/herself to deliver an item, and another one to pay for it. It can be done authentically or privately”.

Thus, a sale is a convention by which a seller gives up his right to an item or engages him/herself to provide for a service on the behalf of a buyer, who obliges him/herself to pay for a price. It is of more importance to focus on the fact that it is not a sale, but an exchange when the compensation is not an amount of money.

As far as the article 264 is concerned, it stipulates that:

“It is perfect between parties, and the property is an acquired right to the buyer, as far as the seller is concerned, as soon as the item and the price are agreed upon, even though the item has not been delivered and the price paid yet”.

  According to the dispositions of the previous article, the sale is already done at the moment of the agreement between the buyer and the seller, i.e after the willingness of the seller and the one of the buyer about the item and the price have already met, without being necessary that the Item is delivered or paid.

Notice that a sale can be commercial according to the fact that it concerns the operations of goods’ sale between trader, natural person on one hand, or the legal person in the framework of their professional activity, and on the other hand, un acquirer who can, be an individual or a trader; or a civil sale, as soon as it is concluded between parties that are all natural persons. The distinction of those two notions presents some consequences as far as their legal supervision is concerned, chiefly the competent court or tribunal in case of litigation. The characteristics and other criteria of distinction are several but will be developed in future articles

Electronic sales, dwelling omnipresent in our society, the multiple transactions it causes give birth clearly to different litigations that need to be discussed about in order to permit to the users to decide carefully.

Several questions deserve being asked, referring to that thematic about litigations caused by sales on line which are somehow likely to imply the crypto currencies.

Sometimes, the way of contract conclusion is different from the one of delivery, as the virtual person is the image of a natural person located in a state. In fact, the offensive effects of electronic activity are resented out of cyber spaces by natural persons or legal persons. In that hypothesis, does the classical law find any place?

The offer and the acceptance cannot be achieved at the same moment in that hypothesis, where the persons are located far from one another, the consents instead of being simultaneous, they are successive. What are therefore the moment and the place of the conclusion of sale contract one line? And when the risks are legally transferred to the buyer?

As the rules of positive law governing the proof are generally conceived for physical relations, how therefore, can one demonstrate the existence of a contract in such an environment? Are the classical rules related to the proof administration adapted to the litigations resulting from the sale on line?

The great majority of sale contracts on line is cross-border. Consequently, several applicable registrations are possible, the one of the buyer’s country, and the one of the seller’s country in the hypothesis in which the parties did not choose the applicable law in their contract. It is the same for the competent court or tribunal. How therefore the international private law apprehends this question. In the sale contract on line, the seller does not always know all the information regarding his/her clients' identity.

Therefore, what will be the fate of a contract in which the client is affected by the general exercise incapacity. How does the tax administration supervise the cryptocurrencies, which have already taken a considerable place on the speculative market? Is it legalized in Burundi? Is the execution of the judgement made abroad possible? If yes, is it easy? Are the alternative mechanisms of litigation resolution possible? If yes, what are the advantages and the disadvantages.

By looking at the different questions mentioned above, how is the litigation related to the sale online presented in the Burundian law?

Any serious observer could not contest the fact that certain technical characteristics, not all referred to e-commerce, arise legal problems that request new rules elaboration, and consequently the birth of a new law discipline, e-commerce law.

The topic being extremely vast, we are suggested, in this part, to present only certain concerns which could call the attention of everyone while concluding an online sale contract that implies or not the cryptocurrency. The steps of solutions’ suggestions will be undertaken in our future articles.