In a recent property dispute case in front of a Chinese court, a judge declared that Bitcoin can be considered a virtual property with value, making it a legally protected asset. China is seen as having an antagonistic view of Bitcoin, does the new ruling change this?
China has a long and complicated relationship with Bitcoin. The nuances of which are not always understood by Westerners or the mainstream media, who have tended to push the ‘China bans Bitcoin’ narrative. However, China remains an integral part of the crypto ecosystem, with more than 50% of Bitcoin’s hashrate coming from mining farms in the country. However, the authoritarian ruling party has banned local cryptocurrency exchanges and token offerings, as part of its strategy to control the population and its ability to move capital out of the country.
Despite this situation, it is not illegal for people to hold cryptocurrencies or exchange them with each other. The Chinese leadership is also actively exploring how it might implement its own blockchain solutions to compete against the US, and track its own citizens. The People’s Bank of China (PBoC) started a Digital Currency Research Initiative in 2017 to explore these options.
Bitcoin is virtual property says Chinese Internet Court
According to a local media report, on July 18, the Hangzhou Internet Court heard its first Bitcoin property infringement case during which it officially acknowledged that Bitcoin has a “virtual property” attribute.
The court stated that “Bitcoin holds the same attributes as property – valuable, scarce and disposable. We should recognize it as a virtual property.”
According to “The General Civil Law”, virtual property is legally protected by the laws of the People’s Republic of China.
The ruling by the court is being interpreted by some as positive for China’s Bitcoin community in a jurisdiction that has struggled with a regulatory pushback against decentralized digital currencies for years.
Chinese Bitcoiner Dovey Wan, founding Partner at Primitive and execute director at Hardcore Fund, pointed out the significance of this court ruling on Twitter. She tweeted: “Wow, Bitcoin is legally protected in China.”
The Hangzhou Internet Court, located in the Zhejiang Province, is one of three newly-established courts that handle Internet-related cases such as copyright infringement and contract disputes over digital services or the sale of goods and services online.
The new Chinese Internet courts recently declared that they will accept blockchain data as evidence.
A dispute over 2.675 Bitcoin
According to a report by Beijing News, China’s first Bitcoin property infringement dispute was between a small Bitcoin investor and the companies that operated the platform where he purchased Bitcoin.
In 2013, plaintiff Wu reportedly purchased 2.675 BTC for around 20,000 yuan on the platform FXBTC, which was operated by the Shanghai Science and Technology Company. In 2017, when Wu tried to log onto the platform again to access his coins, he found that the platform was no longer accessible.
Wu stated that the Shanghai-based technology company did not give enough of a warning before the closure of the platform, which led to substantial economic loss for the plaintiff. Additionally, during that time, digital currencies were banned from the Tabao Network. Hence, the plaintiff believes that Tabao did not fulfill its audit obligations, which led to the sale of prohibited goods on its network. As a result, he wants both companies to bear the costs of his financial loss of 76,314 yuan (the value of the BTC holding at the time of prosecution).
The court found that the plaintiff’s claims against the defendants were insufficient and rejected the claim.
However, the key revelation from this dispute is that Bitcoin is legally considered virtual property under “General Principles of Civil Law” implemented in 2017 and it is, therefore, legal to own Bitcoin in China.