China: Bitcoin Should Be Protected as Property by Law, Arbitration Court Rules

The Shenzhen Court of International Arbitration has recently ruled that cryptocurrencies like bitcoin should be protected by law as property, in a case that saw two parties dispute cryptocurrency possession at the end of a business contract.

The court case, first spotted by Chinese news source cnLedger, details an unnamed plaintiff signed a contract with a defendant, so the latter would use the plaintiff’s cryptocurrencies to trade on his behalf. Per the case, the defendant failed to properly manage the cryptocurrencies, and subsequently refused to return them.

The defendant argued that a ban from the country’s central bank, the People’s Bank of China (PBoC), in late 2017 on cryptocurrency trading platforms and initial coin offerings (ICOs) means cryptocurrency payments and transactions should be illegal in the country, which would mean the entire contract was invalid.

The defendant further argued the ban made it impossible to trade cryptocurrencies in the region. The court noted the case wasn’t about cryptocurrencies, but about the contractual obligation the defendant had of returning the cryptocurrencies.

The contractual obligation, it noted, doesn’t fall under the PBoC’s ban on cryptocurrency trading. In fact, the arbitrator argued there are no laws surrounding cryptocurrency ownership and transactions between citizens. As such, it implied, seemingly nothing stopped the defendant from sending over the funds.

Per the court, whether bitcoin is legal tender or not, it should still be legally protected as property. The case’s analysis reads:

Bitcoin has the nature of a property, which can be owned and controlled by parties, and is able to provide economic values and benefits.

Currently, no laws govern cryptocurrencies in China, so the country’s thinking into the nascent industry is seemingly being decided on a case-by-case basis. In this one, 20 BTC, 50 BCH, and 13 BCD were included in the dispute.

Notably this isn’t the first case in China where a court rules a cryptocurrency should be “protected by law.” As CryptoGlobe covered, the Shanghai Hongkou District Court ruled ETH should be protected as general property in a case that saw a defendant refuse to return 20 ETH to an ICO investor.

A post analyzing the case read:

The court considered that the current state didn’t recognize the monetary properties of so-called “virtual currencies” such as ether, and prohibited financial activities in them, including their circulation. However it cannot deny the fact that ether should be protected by law as general property.

The analysis’ author, at the time, noted the case may have set a precedent in the country, which was likely to keep on admitting cryptocurrencies should be protected by law as property.

Coinbase Commerce Now Lets Merchants Accept USD Coin (USDC)

On Monday (May 20), Coinbase announced that "Coinbase Commerce", which provides non-custodial cryptocurrency payment solutions, now allows businesses to accept fully dollar-collateralized stablecoin USDC.

History of USDC

As CryptoGlobe reported on 26 September 2018, "USDC Coin" (USDC for short) was launched on that day by Goldman-funded FinTech startup Circle Internet Financial (better known as "Circle"). This is a regulated fully-collateralized dollar-backed stablecoin that was originally announced on 16 May 2018. USDC is based on an open source fiat stablecoin framework developed and governed by the CENTRE project.

Circle said at the time that the problems with existing fiat-backed solutions (such as Tether's USDT) were that they "have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies."

In contrast, Circle's USDC stablecoin deals with these issues by "providing detailed financial and operational transparency" and "operating within the regulated framework of US money transmission laws, reinforced by established banking partners and auditors." USDC tokens are ERC-20 compatible (meaning that they run on the Ethereum blockchain); they are minted, issued, and burnt/redeemed based on network rules defined by CENTRE. 

Coinbase's Previous Involvement With USDC

On 23 October 2018, Circle announced that Coinbase (another member of the CENTRE consortium) was making USDC available to its customers on Coinbase Consumer and Coinbase Pro, and that customers could "tokenize dollars into USDC and redeem USDC into dollars through both Circle and Coinbase."

Then, on May 14, Coinbase said via a blog post titled "Expanding USDC crypto trading globally" that:

  • It was making USDC trading available on Coinbase Consumer and Coinbase Pro in 85 countries.

  • It was doing this to help "accelerate the global adoption of crypto trading" and to provide wider access to "a stable store of value."

  • There are more than 300 million USDC tokens currently in circulation today, and that USDC is supported by 100+ ecosystem partners.

  • Stablecoins "have the potential to materially improve the lives of people in countries where inflation is eroding wealth." 

  • Coinbase serves customers in 103 jurisdictions.

Coinbase Commerce and USDC

Coinbase Commerce was launched on 14 February 2018. Coinbase described Coinbase Commerce as a new service that "enables merchants to accept multiple cryptocurrencies directly into a user-controlled wallet," and that in contrast to its previous merchant products, it was "not a hosted service, so merchants have full control of their own digital currency." Four cryptocurrencies were supported back then: Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), and Litecoin (LTC).

Coinbase Commerce can be "directly integrated into a merchant’s checkout flow or added as a payment option on an e-commerce platform." Initially, the only e-commerce platform supported was Shopify, but on 6 August 2018, support for WooCommerce was added.

Yesterday's blog post said that now Coinbase Commerce has added support for stablecoin USDC, thereby allowing "businesses to accept payments online in the same way they’re able to accept cash in-store." 

Here are a few things to note about Coinbase Commerce:

  • "Coinbase Commerce doesn’t charge any fees to process payments."
  • "Coinbase Commerce accounts are completely separate from Coinbase accounts."
  • "You can use the withdraw functionality to send cryptocurrency to an address associated with your Coinbase account."

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