Section 2.1
What does it mean to own crypto?
Begin with four questions: what is the asset, who can direct its movement, whose records establish the customer's position, and what rights does the customer hold?
These questions are especially important because technical control can be exercised without a conventional account operator checking the authority of each instruction against a named person's identity.
| Arrangement | Technical position to identify | Further question |
|---|---|---|
| Directly controlled native asset | The spending conditions governing the recorded asset | Who controls the means of satisfying them? |
| Asset held through a custodian | The custodian's control arrangements and customer allocation | What rights and duties apply to the custody relationship? |
| Balance at a trading venue | The venue's internal record and associated assets | What can the customer withdraw, and on what terms? |
| Tokenised external claim | The token record and its connection to the underlying arrangement | What is delivered by ownership or redemption of the token? |
Do not infer legal ownership solely from control of keys. UNIDROIT's Principles on Digital Assets and Private Law distinguish factual control from proprietary rights and address custody and insolvency separately. They provide an international framework, not a substitute for the applicable law and contractual arrangement in a particular case.1UNIDROIT, Principles on Digital Assets and Private Law: overview. Control, proprietary rights and custody as distinct concepts.Open sourceSee in source list
“Not your keys, not your coins” is therefore an operational warning about dependence on a controller. It is not a complete statement of property law. Conversely, possession of stolen signing material does not automatically resolve ownership in favour of the possessor.
Trace authority through a custody chain
Consider a fictional fund with 100 BTC recorded on its custodian statement. The custodian uses a subcustodian, which operates the signing infrastructure. The fund's investment manager can submit instructions but cannot directly produce a valid network transaction.
The analyst should distinguish:
• The fund's position under the custody arrangement.
• The manager's contractual authority to instruct.
• The custodian's responsibility to process the instruction.
• The subcustodian's practical ability to authorise network movement.
• The network assets available to support the recorded positions.
A dedicated address would make some observations easier, but would not, by itself, establish the full legal arrangement. An omnibus address would aggregate positions, making the allocation dependent on additional records. In either design, a statement balance and a network balance answer different questions.
As a due-diligence exercise, ask what would happen if the custodian remained solvent but its signing provider became unavailable. Then ask what would happen if signing remained fully operational but the custodian entered an insolvency process. These are different failure modes requiring different evidence.
The technical model introduced in this chapter supports that investigation. Detailed custody architecture, segregation and institutional security controls belong in the later custody chapter.