Anyone who holds Bitcoin in self-custody controls the relevant assets through a cryptographic key (private key). If the private key is lost, access to the Bitcoin may effectively be lost as well. From a legal perspective, however, it is important to distinguish between the different reasons why access to Bitcoin has been lost. While legal remedies are of little assistance where the holder simply loses the private key, the situation may be different in the case of an erroneous transfer, a hacking attack or a loss caused by a service provider.
Loss of the private key
With self-custody, the holder is generally responsible for securely storing the private key and seed phrase. If these access credentials are lost, the Bitcoin remain recorded on the blockchain but can no longer be transferred. In such a case, legal remedies offer little assistance. Unlike a bank account, there is no central authority that can restore access or issue new credentials.
The situation may be different if a third party is responsible for the loss. For example, if a professional custodian breaches its contractual obligations and loses the access credentials, claims for damages may arise. Claims for damages may also be available if a third party unlawfully damages or destroys the access credentials.
Erroneous or unauthorised transfers
Bitcoin may also be lost because they are inadvertently transferred to the wrong address. Such a transaction generally cannot be reversed on the blockchain. This does not, however, automatically mean that the recipient is legally entitled to retain the Bitcoin.
If the recipient is known, the sender may in particular have a restitution claim based on unjust enrichment pursuant to Art. 62 of the Swiss Code of Obligations (CO). The technical finality of a blockchain transaction must therefore be distinguished from the question of whether the recipient is legally entitled to the transferred assets.
The same applies if a third party gains unauthorised access to the private key and transfers Bitcoin to another address. In addition to civil law claims, criminal proceedings may also be available.
A traditional proprietary claim for restitution under Art. 641 para. 2 of the Swiss Civil Code (CC), however, is generally not available. In a decision dated 16 April 2024, the Cantonal Court of Basel-Landschaft held that Bitcoin, due to their lack of physical substance, do not constitute tangible property within the meaning of Swiss property law. Consequently, a proprietary claim for the return of Bitcoin is not available. Instead, recovery must be based on other legal grounds, in particular contractual claims, unjust enrichment or tort law.
Securing and recovering stolen Bitcoin
In the event of a cyberattack or other unlawful act, criminal law can be of particular importance. One advantage here is that Bitcoin transactions remain traceable on the blockchain. If, for example, assets stolen through a criminal act end up on a centralized crypto exchange, it may be possible, under certain circumstances, to identify the account holder and seize the assets.
The loss of technical control over digital assets therefore does not necessarily result in the loss of all legal claims. The remedies available depend primarily on how and why access was lost.