A Chinese arbitration court declared crypto-assets such as Bitcoin must be treated as legal property, despite an infamous blanket ban on cryptocurrencies in the country.
Chinese Court Classifies Bitcoin as Property
As reported by a local news outlet, the Shenzhen Court of International Arbitration ruled cryptocurrencies must be legally protected as a property with “economic values.” The ruling came after a recent business conflict over the possession and transfer of crypto-assets surfaced in the region.
1/ Chinese court confirms Bitcoin protected by law. Shenzhen Court of International Arbitration ruled a case involving cryptos. Inside the verdict: CN law does not forbid owning & transferring bitcoin, which should be protected by law bc its property nature and economic value.
— cnLedger (@cnLedger) October 26, 2018
A case analysis was published on Oct. 26 via WeChat. As revealed, the unnamed plaintiff signed a contract with the defendant, allowing the latter to manage, trade, and invest in a pool of cryptocurrencies on the former’s behalf. However, the arrangement turned sour after the defendant refused to return the plaintiff’s cryptocurrencies post a determined deadline with interest on asset gains.
A total of $493,000 worth spread over 20.13 bitcoin, 50 bitcoin cash, and 12.66 bitcoin diamond are at dispute.
The absence of specific laws governing cryptocurrencies in China meant authorities approached the case with leniency – providing the broader cryptocurrency ecosystem with an opportunity to assess China’s legal views on the rising asset class.
Citing 2017’s cryptocurrency trading and ICO ban put into effect by China’s central bank, the defendant stated all crypto-transactions and payments are illegal in the nation, rendering the contract, by default, to become invalid. He added that the lack of bourses and legal crypto-exchanges in the nation meant returning the cryptocurrencies to the plaintiff was impossible.
Providing Insight Into Bitcoin’s Perception
The court disagreed with all points put forth, stating the return of cryptocurrencies is a contractual obligation not governed by the central bank’s dictum. Importantly, the court stressed that no Chinese law prohibited the possession of bitcoin or its transaction between two parties. Furthermore, the court observed sending bitcoins was not a technical difficulty as long as one possessed the private keys and had a wallet address.
The court concluded bitcoin should be legally protected by China’s Contract Law, regardless of its status as illegal tender in the country:
“Bitcoin has the nature of a property, which can be owned and controlled by parties, and is able to provide economic values and benefits.”
The Shenzhen court is one of the Arbitration Committees formed in China after a 1995 law enabled local governments to form such entities to solve dispute related to contract issues in business, real estate, and finance.
For more information:
Cover Photo by Manuel Joseph on Pexels