The writer is founder & CEO of Digital Self Labs and visiting scholar on financial technology at Georgetown University Law School
In 1758, an English mail coach carrying banknotes was robbed. The robber used one of the stolen banknotes to pay for a room at an inn. The original owner of the banknote asked the Bank of England to stop payment of the note, whereupon the innkeeper sued. The case of Miller v Race rose to England’s highest court judge, who ruled that the innkeeper was the rightful owner of the banknote.
The judge, Lord Mansfield, opined that if a merchant always had to question whether there might be an upstream property interest in a banknote then the notes could not be used to grease the wheels of commerce. Therefore a banknote made out to bearer and payable on demand must be treated as currency — a medium of exchange.