Private key disclosure

testimony by Mary Beth Buchanan


Thank you. We had an opportunity at lunch to talk about some the debate that had occurred about the amendment. I felt that I had some perspective to offer. My name is Mary Beth Buchanan and I'm the general counsel for Kraken.

I spent 21 years with the US justice department prosecuting a whole array of cases including violent and non-violent crime, and representing the government in civil matters. I think it's important to know that the government has a broad power to treat different types of property differently, in terms of looking at legislation, and legislators have the ability to designate property differently. There are a lot of statutes that we could look at, whether it's the bankruptcy code, divorce proceedings, and different states can designate property to be different. You can look at a lot of other statutes to see that legislators do designate different property differently.

The topic that we discussed was whether private keys can be treated differently. I think that looking at the private key, it is, it is different because it holds an entirety of in some cases the bitcoin holdings. If a court wanted to order that a certain digital asset be subject to a judgement, turning over a private key might subject that party to turning over a greater amount of assets than the subject of that court order would be.

I think that in your legislation it would be appropriate to carve out private keys from the types of assets that a court could ordered to be turned over.

Q: That is an exceptional point. I hadn't really considered that. I was listening to Senator Nethercaught, I disagree with on principle though. I think your rebuttal is pretty devastating.

A: In criminal cases for example, if someone has committed a crime and they have defrauded victims and say that there's a million dollars that victims have lost, and a court enters a judgement of $1 million dollars, and a court wants to find $1 million of assets. The order that the defendants be subjected to an order, and they identify those particular assets, and earmark those assets to include a private key in those assets could potentially subject the individual to losing amounts above and beyond of the order. It's one thing to say you're liable for your cryptocurrency in the amount of $1 million dollars which might satisfy the judgement, but handing over the private key would expose you to risk of loss in an amount far greater than what the judgement calls for.

Q: Thank you, Mr. Chairman. So I hear the fear of exposing more than what should be exposed in the order. Whatever the order is; pick any standard. But couldn't my attorney just file a motion to say hey there is more information on here than what would be needed? Wouldn't the opposing counsel file back another motion and say no, we want it all? The first turn back would say, okay, let's do a review judge and the judge would review to make sure that just like in any discovery dispute you're not entitled to this information and you're just on a fishing expedition. In that scenario, in the current existing law and court system, particularly just the rules of criminal and civil procedures.

A: I disagree. I think we're talking about two different things. One, the court could order a disclosure or an accounting of all the digital assets that are held, and then those assets could be disclosed and the location of whether they are held across different platforms or even different wallets. But giving the key is actually giving access to those assets. That is the difference. I think that the key has a different property. That is why I think it can be treated differently.

Q: I think that's the key point: understanding that the key will unlock the information. It's difficult because some may picture that there's a ledger of information and here's a file and I hold it up and I can pick and choose which ones I want to see and not see, but that's not what it looks like when you subject a key to....

A: I think that would be more your public key. If you disclose that, that would be the holdings. You can also subpoena all the platforms or you could order the accounting. Kraken takes it back to my current position, we receive subpoenas every day to disclose balance sheets of individuals and then we provide courts with the balances that individual holds that we have never at least through my tenure we have never been asked to turn over a private key. Turning over a private key would be an exceptional thing. Wyoming has the ability to protect the private key, and I would urge you to do so.

Q: I have two questions. My first question is that you stated you were a federal prosecutor.

A: Yes, in my previous career I spent 21 years as a federal prosecutor. ... colleague of your former governor Matt Mead.


Q: Courts are used to seeing classified materials and doing sensitive materials and deleterious actions, we do have all these things occurring with classified materials nationally. Her thought was, and this would be the same thing when a court handles a private key and they will do so in that manner. What are your thoughts, why is this different?

A: Honestly, I would be very concerned about turning over a private key to a court. As we all know, the difficulty of handling such a thing, there are chances of it being mishandled or lost. Evidence is lost all the time. I think that the important thing is that the court has an accounting of what the assets are and that the court has the ability to order that these assets be turned over, and that the assets may even be paid into the court. I am certainly in support of that. The court has every right to do that. To turn over the private key itself could have devastating effects to the entire assets of a particular individual.

Q: One of the questions along these lines, having had experience with courts and lots of different circumstances, when you talk about the courts, we often speculate and we make an assumption that if two lawyers file motions back and forth that the right decision gets made at the end and the judge will finally say, I don't need to see the private key and I'm satisfied with the public key and the right assets, and that's what we hope for. Do you feel fully confident that the courts and the lawyers would end up not asking to see the private key?

A: The court doesn't need to see a private key. What the court needs to validate is that the assets exist.

Q: Thank you for the comments on this panel. I tend to agree with you that private keys are important. I am curious about the civil and criminal context, or do you feel differently about those?

A: I do say it would apply to both civil and criminal. In a criminal context, courts have a higher ability to seize assets. The standards are different. They have the ability to seize them pre-judgement whereas in a civil matter there has to be a judgement first. I would still assert that it is not necessary for the private key to be turned over in either civil or criminal litigation.

Thank you so much for your time today, we really appreciate it.