Now that an all-star attorney has been selected for the Silk Road operator's defense, the big show moves to key disclosure laws and whether the Silk Road assets can ever be confiscated by the government.
While the government presumably has control over the 26,000 or more bitcoin held in escrow for Silk Road customers, the larger asset base is the primary bitcoin addresses containing over two years worth of operating commissions. FBI estimates place this amount at nearly 600,000 bitcoin (currently worth $80m), however it is probably significantly less than 600,000 since earlier bitcoin was not worth what it is now and some of it would have been paid out to employees or reinvested back into ongoing operations.
Regardless, if access to those bitcoins is maintained via a brain wallet, then the only way for the government to gain access would be by compelling the defendant, Ross Ulbricht, to reveal his passphrase and private keys. A high-profile case such as this one making its way to the US Supreme Court would be as significant for bitcoin user rights as Roe v Wade is for women's abortion rights.
In the US, the government has typically run into the Fifth Amendment when attempting to gain access to passphrases and demand private key disclosure. Last year, Marcia Hoffman of the Electronic Frontier Foundation gave an excellent presentation on the evolving nature of these legal cases and how the privilege against self-incrimination is seen by the government as having boundaries and limitations.
Bitcoin may not have tremendous anonymity by default, but it does have tremendous deniability and that would be the preferred legal route for Ulbricht, according to Susan Brenner, professor of law and technology at the University of Dayton.
"But what's the message here? That bitcoin is a hugely valuable property, that it is hard for the government to rob, that it is the real thing and an authentic store of wealth, that it is a viable replacement for the dollar. These are the messages that are being sent by the government's actions.
The supreme irony: the Silk Road shutdown and looting might go down in history as the greatest boost to private currency ever. We could look back and see this as the event that finally unraveled the government's money monopoly and the world's problem with dollar imperialism."
And there you have it. The most interesting aspect of the Silk Road case may not be the demonstrated capability of a regulation-free commercial zone. Nor may it be the breakthrough in merchant anonymity with a ratings system powering a digital agorism.
The most interesting aspect of the Silk Road case will most likely be the sweeping legal precedent set for compulsory key disclosure and the Fifth Amendment. If your online wealth cannot be robbed by common bandits or government officials, then the world truly has a digital money worth paying attention to.
Compelling an individual to turn over passwords or private decryption keys affects more than just access to financial property and information. It extends into any digital property or private information that is under the custody of an individual where its revelation constitutes self-incrimination.
But, it is the bitcoin area that has the greatest relevance for financial matters because access to the distributed bitcoin block chain is how ownership and transfers of that ownership are determined. Comprehending bitcoin 'ownership' requires an understanding of both peer-to-peer distributed computing and public key encryption for bitcoin addressing.
When it comes to financial matters, protected wealth beyond confiscation has profound implications that alter society from its current trajectory of absolute financial surveillance. Key disclosure laws have much to say about how this scenario plays out and it will vary among jurisdictions. Due to growing and pervasive cryptography in our lives, it will come to be the single defining issue for liberty in the digital age. We must have universal and unconditional privileges against compulsory self-incrimination.
The effect of upholding the Fifth Amendment against compulsory key disclosure benefits not just drug crime defendants, but everyone that uses non-retrievable passwords.
For instance, pretrial legal funds could be segregated and deployed when necessary so that targeted defendants are no longer drained of the means for immediate and complete representation, as was the case with Kim Dotcom.
Tax haven assets and other offshore banking activity, such as Cyprus, would no longer be subject to the trust of a bank or third-party custodian that shifts trusted privacy policies based on the latest politics or Nation-State bullying.
Levels of overall financial privacy, including retirement and inheritance instructions, would be determined by the individual without inversely asking for permission to retain your financial privacy.
The government is only discovering the power of the bitcoin block chain for the first time now, but its liberating properties are seductive on multiple levels. Even if the government and police are able to seize access to the bitcoin property involved in a criminal or civil asset forfeiture, they can no longer secretly divvy up the booty as graft and that is good for all of us.
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