The Advent of Virtual Digital Assets: Analysing its Status in the Fintech Sector

Abstract

Fintech, or financial technology, introduces the role of technology in finance, which forwards the discussion on big data, artificial intelligence (AI), and machine learning, facilitating investment opportunities. However, it is considered to have been introduced and evolved as the Bitcoin protocol in 2009. Digital assets date with the coining of ‘bit gold.’ This was formulated as a decentralised digital currency. The aim behind introducing such a currency was to have a payment mechanism outside the vigilance of the central authority, with a recurring high value. This laid the foundation of blockchain technology, inaugurating the market in digital assets. The utilisation of distributed ledger technology attracted a lot of financial players towards it. Creating digital assets and their required funding subsists on ongoing market changes and investor demands. Computer codes form the skeletal framework of digital assets and depend on agreement-based computer algorithms for effectuating transactions. These digital assets include an almost exhaustive range of virtual assets. Shifting the discussion to the "good faith acquisition" regime, when the transferee of property acquires a good title irrespective of the defect in the title of the transferor, it is known as "good faith acquisition" or "negotiability," an exception to the general rule: nemo dat quod non habet ("no one gives what they don't have"). In this scenario, good faith acquisition (negotiability) is quite relevant as digital assets transfer functions based on quite complex structures, which can be deceiving in disputes arising from insolvency, etc. This has been brought to light with the example of a digital asset held in custody by a third-party intermediary. Here, the legal status of the asset is uncertain, which creates the problem of determining who has the right to claim ownership over it. This is where the new legal framework for digital assets is needed to clear the air and award digital tokens the status of ‘property’ regarding these issues. The proposed legal framework can take due recourse to legal concepts, such as the law of bailment. This paper seeks to analyse and establish the legitimate status of virtual digital assets globally, slowly transitioning to a virtually driven e-community.