Bitcoin Should Be Protected by Law Says Chinese Court

By Chetna Phour

According to the Shenzhen International Court of Arbitration, Bitcoin should be protected by law because of its property nature and economic values. Though the trading of cryptocurrencies is not legal in China but the arbitration body ruled in favour of Bitcoin.

Recently a case was held in Shenzhen International Court of Arbitration related to an equity transfer agreement. The agreement was related to possession and transfer of cryptocurrencies. The case review states that:

“This case is a dispute over equity transfer, which is a new type of case because it involves special types such as BTC (Bitcoin), BCH (Bitcoin Cash) and BCD (Bitcoin Diamond).”

An unnamed plaintiff signed an agreement with the defendant. According to the agreement, the defendant had to manage and trade a pool of digital assets on behalf of the plaintiff. According to the plaintiff, the cryptocurrencies included 20 Bitcoin (BTC), 50 Bitcoin Cash (BCH), and 13 Bitcoin Diamond. The combined worth of these cryptocurrencies was $493,158. Plaintiff further said that the defendant failed and refused to transfer the digital assets after an agreed deadline that is why they brought the case to the arbitrator and looking forward to getting back the digital assets with interest. The court said that:

“There are no laws and regulations that prohibit it ($BTC) from becoming an object of private delivery or transfer.”

The court further added that digital assets or Bitcoins are legally protected by law. Though Bitcoin and other cryptocurrencies are not fiat currencies but they can be considered as property so nobody can prevent Bitcoin from being protected by law as property. The analysis offered by arbitrator offers a window to think about the nature of financial technology.

The defendant said that there is a ban from China’s central bank on the trading of cryptocurrencies and initial coin offerings (ICOs) which means payment and transfer of digital assets is illegal in China. The defendant further added that because of the ban by the People’s Bank of China (PBoC) there is no avenue left behind to transfer the cryptocurrencies to the plaintiff. So the entire agreement by default becomes invalid.

However, the court disagreed on the argument and said that there was a contractual obligation for returning the digital assets which do not fall under the trading of cryptocurrencies and ICO categories which are outlined in the ban by PBoC. The arbitrator further added that there should not be any technical issue in sending Bitcoin as long as one has a cryptocurrency wallet and private key. Arbitrator commented:

“The Arbitration Court noticed that, after September 2017, major Bitcoin exchanges operating in China at the time suspended their businesses. But technically, that fact does not prevent the defendant from sending the Bitcoin and Bitcoin cash at dispute to the plaintiff upon the agreed deadline.”