Last semester I wrote a thesis entitled:
An analysis of the mechanism of perfection by control in the PPSA, and a critique of the mechanism by an application to control of an ADI account, and control of Bitcoin.
With the kind supervision of Jason Harris, I was able to write a paper that straddled two relatively novel areas of law that interested me: the Personal Property Securities Act (2009) and Bitcoin. Since I will be submitting parts of the paper for publication, I am not going to post the whole thesis here. However, I am happy to post my abstract:
This thesis is a critical analysis of a complex, and largely novel part of the Personal Property Securities Act (2009) – perfection by control. This Act serves to rank the interests of secured parties in the collateral that secures them.
Whilst most interests are ranked according to the time that they are registered, there are a few exceptions to this. Most relevantly for this thesis, one such exception is security interests perfected by control. These interests are in intangible assets. Where the control provisions are satisfied, they grant the secured party a super-priority over registered interests.
The nature of this super-priority is explored in the first case study, which analyses a priority contest between a Bank’s interest (so perfected), and the proceeds of a purchase money security interest (a lesser super-priority).
However, the Achilles heel of the control provisions is the restriction of the asset-classes to which control applies, and its corollary: asset specific tests for control. This weakness is highlighted by the second case study – a priority contest similar to the first, but with a novel intangible asset – a bitcoin account.
First, this chapter shows the possible results of such a priority contest, highlighting the consumer protection benefits of applying control to the novel asset-class. Second, the asset-class is normatively and technically analysed, proving that the secured party in this novel asset-class holds equal or greater “actual” control than secured parties in established, controllable asset-classes.
Then, the current asset-class-specific control provisions are applied to the priority contest, and it is shown that the current provisions do not allow such an interest to be perfected by control.
Using the second case study as an analytic fulcrum, this thesis posits that the current, asset-class-based tests are too narrow, artificially constricting perfection by control. After an analysis of the central similarities of the control provisions, this thesis presents an alternate, universal test for control.
I am also proud to publish here my acknowledgements. Without the people I mention below, I would not have been able to write what I did.
I would like to acknowledge and thank my supervisor, Jason Harris, for his counsel, guidance and support. I would like to thank Nicholas Mirzai, Amor Sexton and Bianca Balzer for being sounding boards for my ideas.
I would like to acknowledge my father, Avner Ottensooser, for explaining to me the technically correct manner of expressing the mechanisms of bitcoin graphically, and for auditing my technical ideas. I also wish him a speedy recovery.
I would like to thank the Australian Digital Currency and Commerce Association, especially board members Jason Williams of BitPos and Ronald M. Tucker of Bit Trade Australia for technical assistance. I would also like to thank the Banking and Financial Services Law Association for hosting a talk on Bitcoin at exactly the right time, giving me a few new ideas to ponder.