Canada: What Is The Law Of The Blockchain?

Last Updated: March 17 2016
Article by Donald B. Johnston

What the Heck is the Blockchain?

No, it's not a chain that stretches around your block. It is a peer-to-peer managed, publicly readable and secure database, chunks of which are located in multiple places. Each "place" (or node) is an isolated and independent computer on a network. Each computer is equipped with special software for management of the blockchain. The blockchain database itself contains an ever-expanding list of verified transaction data. Think of a blockchain as a bullet-proof record of proven transactions that everybody (with the appropriate software) can check.

The first blockchain was developed to record bitcoin transactions in a publicly accessible way, and that bitcoin blockchain is the archetype for this technology. However, blockchains could be used for all kinds of purposes – recording financial transactions, enabling digital rights management for movies and music, replacing letters of credit or transactions done with letters of credit, settling trades of securities or foreign exchange, and so on.

The blockchain got its name because it is a chain of digital blocks, each of which is a tamper-proof batch of valid/verified transactions. Each block refers (or is linked) to the immediately prior block, just as each link in a chain is connected to the immediately prior link. You would know if a block got out of sequence or was orphaned because it would be a link that is outside the chain. You would know if a block were tampered with for the same reason.

As mentioned, blocks in a blockchain contain verified transaction data. In the case of bitcoin transactions, each transaction is digitally signed with an encrypted signature. Each bitcoin transaction consists of a spent amount and a received amount, and those are (by definition) the same, just as it is in the corner store when you buy cigarettes. Which you shouldn't do, by the way, because smoking is dangerous to your health.

How is a Blockchain Secure?

As mentioned, the blockchain is distributed among a number of independent and isolated nodes in a peer-to-peer network. Each node is a computer. In other words, the blockchain is anonymous and decentralized – and that is part of its security. Each transaction or event is broadcast to every node on the network, and each node on the network validates it through a challenge-response system and rebroadcasts it. The result is that independent nodes in a network containing the blockchain database can arrive at a "consensus" that the database entries are correct. That means that transactions can be checked and confirmed and declared valid, and attempts to corrupt the data can be made unsuccessful and obvious by being (in essence) ignored.

In the case of the bitcoin blockchain, there is a financial incentive for "bitcoin miners" using sophisticated and very fast computers and appropriate software to operate the blockchain "ledger." In consideration for running and maintaining the blockchain (thereby maintaining validated copies the confirmed records of transactions), these "miners" receive a bitcoin reward that they can actually spend.

Imagine, however, a different model of blockchain use, in which a coterie of financial institutions operate their own blockchain for financial transactions without such a reward; instead, speed of settlement, cost reduction and enhanced security would be their reward.

Who Uses Blockchains?

Blockchains are perfect for financial transactions, whether with bitcoins or ordinary money. Because the blockchain system uses a lot of different computers to prove that a particular transaction has actually occurred, and that consensus is recorded after confirmation, the financial record becomes essentially tamper-proof. Blockchains can also be virtually instantaneous, providing quicker confirmation of a money transfer, for example, or other financial management event.

Blockchains would also be good for digital rights management: who has a copy of a copyright protected musical or theatrical work, what copies of it have been made, where and how it has been used, etc. Rights organizations would be able to operate a blockchain that would provide a denial proof database of all managed digital rights, use of digital rights and the payments made in connection with them.

What are the Legal Issues with Blockchains?

In the case of bitcoins, the most obvious legal issue is that of anonymity. Bitcoin can be used to finance terrorism, purchase and sell illegal drugs, and make ordinary money "disappear" from the scrutiny of the law. It's also a way to hide transactions that are subject to tax.

Blockchains do a better and faster job of recording "money in" and "money out" and so they could possibly replace chartered banks as holders and managers of any denomination of currency. The legal issue there includes the fact that banks are regulated and blockchain operators are not. Banks can be subpoenaed for their records; good luck with the blockchain operators. Banks must report to FINRA and FINTRAC and similar anti-money laundering and anti-terrorist financing organizations; blockchain operators do not and probably can't be made to do so.

What blockchains can do exceedingly well is to form and execute digital contracts. Digital contracts (sometimes called "smart contracts") are contracts that are written in computer code and are enforced by software when certain pre-programmed conditions are satisfied. When the conditions are satisfied (e.g., delivery of goods, the making of a payment, the winning of a football game, the registration of a deed or transfer), the blockchain can perform the transactions and pay money. The law is already having a tough time catching up to the concept of robots making contracts for people. Blockchains will make that harder. Lawyers' heads will explode.

Blockchains have the ability to track changes in ownership or status of property, including real estate and leased goods. Contracts for the transfer of such assets would be virtually unbreakable because no one would be able to argue "I didn't know what I was signing" or "I was under duress." A lawyer advising on a blockchain contract would also have to understand computer programming.

There are likely many other issues with blockchains that will face lawyers as the technology develops further.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Donald B. Johnston
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions