Chinese court recognizes Bitcoin as virtual property, a first
In the ruling of a property dispute case involving Bitcoin on Thursday, the Hangzhou Internet Court recognized that cryptocurrency assets have the attributes of virtual property and should be protected in accordance with Chinese regulations, The Beijing News reported (in Chinese).
Why it matters: The court ruling reaffirms that owning Bitcoin is still legal in China and that it is a commodity with corresponding property rights. Cryptocurrency trading and financing through initial coin offerings (ICOs) are illegal in China.
- This is not the first time a Chinese judicial body has acknowledged the legitimacy of cryptocurrecy assets. In 2018, the Shenzhen Arbitration Commission ruled that cryptocurrency assets should be protected in accordance with Chinese regulations on property ownership.
- According to the court documents, the Hangzhou Internet Court said cryptocurrency meets the virtual property requirements because it is “valuable, scarce, and disposable.”
- The court’s acknowledgment of Bitcoin’s legitimacy does not indicate that other cryptocurrency-related activities will be legalized, but some believe this to be a clear signal that the authorities are starting to loosen their control over it.
“This is the first time that the country’s court recognizes Bitcoin as having the attributes of virtual property and discussed it in a more comprehensive way. This is also the first time it recognizes Bitcoin as valuable, scarce, and disposable, which are attributes of property with protections under Chinese law. This is significant and important to show how such disputes and controversies involving Bitcoin, other cryptocurrency tokens, or digital currency will be handled.” (Our translation)
Pang Lipeng, an attorney on the case
Details: The property dispute started in 2013 when the plaintiff, identified as Wu, purchased 2.675 Bitcoins for RMB 20,000 (around $2,900) from a site called FXBTC via a store on online marketplace Taobao and stored them in a virtual wallet on the site.
- In May 2017, Wu wanted to access his funds but found the site had shuttered in 2014. Wu was unable to contact the site operator and could not recover his Bitcoin.
- Wu decided to file a suit against that the operator who reportedly did not give any notice prior to shuttering the platform and against Taobao for allowing banned items like cryptocurrency to be listed on its website. Wu demanded FXBTC’s operator and Taobao to pay around RMB 76,300 ($11,000) in compensation.
- Wu’s claims against FXBTC’s operator and Taobao, however, was rejected by the court due to a lack of evidence. But the court set a precedent by acknowledging Bitcoin as a commodity with monetary value in the documents.
Context: A sweeping crackdown on cryptocurrency in late 2017 led to the collapse of exchanges and wallet services. However, Facebook’s announcement of its cryptocurrency project and the recent Bitcoin price spike has reinvigorated interest in cryptocurrencies in the country.
- Earlier this year, China’s state planning body added cryptocurrency mining to a draft list of industrial activities it is seeking to restrict or phase out. However, the government’s firm stance against crypto assets may be shifting. Last week, the country’s State Council gave the go-ahead for the central bank to develop its own digital currency.