Ask the average person what they know about Bitcoin and they might be able to tell you that it is a digital currency. Most have probably heard the name mentioned in articles about its giant fluctuations in value or in connection with black market internet transactions. Beyond that, how Bitcoin actually operates remains relatively unknown to the general public. Public opinion of Bitcoin varies wildly and headlines range from “Bitcoin is Flawed, But It Will Still Take Over the World” to “Welcome to 21st-century Ponzi scheme: Bitcoin.”
Recent problems with one of the largest Bitcoin exchanges provides some validation for people’s hesitancy to jump into the world of digital currencies. But it is important to remember that Bitcoin and other so-called “crypto currencies” are a new technology and their prevalence is growing – rapidly. In its 2013 Annual Report to Congress, the Taxpayer Advocate Service, an independent organization within the IRS, noted:
In the four months between July and December 2013, Bitcoin usage has increased by over 75 percent – from about 1,700 transactions per hour to over 3,000. Over the same period, the market value of bitcoins in circulation increased more than ten-fold from about $1.1 billion to $12.6 billion.
The allure of lower transaction costs and publicity has also allowed Bitcoin to gain a footing in the business world. Expensify, an online expense reporting company, even allows its client businesses to reimburse their employees with bitcoins.
While this post is not intended as an in-depth discussion of how Bitcoin or any other crypto currency works, a basic understanding is needed to know why it could be important to your organization and employees.
Bitcoins may be exchanged over the internet, but they are not digital credits to some online account. Commentators usually analogize bitcoins to cash or gold, meaning there is an aspect of possession. Bitcoins are held in “wallets” and there are three general types: desktop, mobile, and web-based. Different wallet applications have different features. Some wallets will only store the bitcoin on the device, where others may have web-based backup. To put it more simply, if you have not taken precautions and lose your Bitcoin wallet, you lose your bitcoins. A quick internet search will turn up a number of sad stories about people who tossed out their old computers now worth millions.
As the prevalence of digital currencies increase, so does the chance that an employee may be storing bitcoins on his or her mobile device. That same mobile device might also contain an employer’s sensitive data. So what should an employer do if an employee calls to say, “I lost my phone, and by the way, my Bitcoin wallet has $1,700 in it?”
A common practice by employers to protect confidential information when an employee loses a company mobile device is the “remote wipe.” A remote wipe is typically executed by a system administrator by sending an email to the employee’s account. In some cases, a remote wipe will simply terminate access to company email and other applications. More commonplace, however, is that the system administrator is hitting the reset button, erasing all data from the phone and returning the device to the original factory settings as if it were just pulled out of the box. Unless an employee is running a wallet application with backup protocols or has taken other prudent security measures, an employer may be deleting its employee’s bitcoins in an effort to prevent unauthorized access to confidential company data.
Bitcoin is illustrative of the problems that employee property on either company or bring-your-own-device phones might create because there is an ascertainable value. But family photos, personal notes, and downloaded media also have value to employees. Rather than taking a wait-and-see approach to how the law may develop relating to issues surrounding the deletion of employee property stored on their phone, employers should be proactive and take the time to review their mobile device policies. Although employees may have notice that a remote wipe is possible, they should also be advised that it is their responsibility to backup and protect their personal property, including their “wallets.”