The German Court of Appeals held that using a known wallet password to transfer cryptocurrency without permission may not violate criminal law.
The decision has attracted insightful criticism from the legal and crypto community warning that it will expose dangerous gaps in existing law.
German legal loopholes allow code thieves to walk freely
The man helped someone (the petitioner) set up a crypto wallet and hold a certain token of 2.5 million euros.
The thief created a wallet and held a 24-word recovery phrase. Unfortunately, the victim never changed the recovery phrase.
After that, without permission, he used the correct recovery phrase to transfer all the coins and potentially steal them. The defendant was not permitted to move the coin and made a false statement.
The Braunschweig superior district court concluded that the defendant did not “hack” the wallet because he used the password he legally set up and held.
Therefore, the case did not meet the requirement of “overcoming special access security” as defined under German criminal law.
Additionally, the court refused to file accusations of computer fraud and found that the deception was not involved.
According to the court, the blockchain system does not evaluate users’ intent or permissions. Just check for the existence of a valid cryptographic signature. The court also dismissed the allegations of tampering with the data.
This means that, as long as someone has a valid password or recovery phrase, regardless of how they obtain it, at least under current German law, moving assets may not count as a crime.
This judgment effectively removes criminal liability for conduct that otherwise would be considered traditional financial theft. It highlights the legal system’s struggle to adapt to the technical structure of decentralized assets.
The court said the act could violate a civil duty, a breach of contract, or a breakdown of trust, but did not state that it would automatically qualify as a criminal offence.
However, the ruling does not suggest that all crypto theft is legal. If your credentials are obtained through scams or hacks, different fees may apply. However, this case is particularly focused on non-technical access using existing known credentials.
For now, the decision exposes a grey area that German lawmakers have not yet addressed.
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