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.
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
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.