A top court in Shangai, China’s biggest city and a global financial hub has upheld Bitcoin as property under Chinese laws, pitting the government against its own anti-crypto stance.
According to a report published by the Shanghai Baoshan District People’s Court, Thursday, May 5, the court stated that “Bitcoin as a virtual property, has property attributes and is regulated by property rights laws and regulation”.
In making the pronouncement, the court referred to a case where a plaintiff, Cheng Mou sued the defendant, Shi Moumou on October 10, 2020, demanding the return of one bitcoin to him. After the judgment came into effect, the defendant failed to return the bitcoin prompting the plaintiff to apply for execution. The court issued an enforcement notice against the defendant, who still defaulted claiming that he did not have any Bitcoin.
While recovering the Bitcoin proved a tough task given the anonymity of transactions, the court nevertheless went on to state that “Bitcoin had the characteristics of value scarcity.” As such, it thus had the characteristics of an object of rights and met the requirements for the composition of virtual property. The court hence had the authority to carry out enforcement and disposal proceedings under the legal norms of property rights.
However, according to Qian Zhengxiao, an Assistant Judge of The Executive Bureau of The Peoples Court of Bashoan District, since there was no way of recovering the said Bitcoin, the court could still enforce its own judgment upon following the due legal process and ascertaining that indeed the plaintiff was owed by the defendant.
“Bitcoin is not irreplaceable, so there are two execution plans, one is purchase and delivery, and the other is discounted compensation,” Zhengxiao said.
A Wake-Up Call?
Currently, Bitcoin is banned from trading in China after a purge that began last year with proof-of-work mining. Due to the lack of corresponding laws and regulations, the legal application in Bitcoin enforcement has remained ambiguous making it difficult for courts to enforce judgments.
Whereas Article 127 of the Civil Code of The Peoples’ Republic of China makes it clear that virtual property is protected by law, it fails to make specific provisions on its concept and application. Most courts have thus remained arbiters in crypto-related cases, encouraging parties to negotiate for discounted compensations or recommending out-of-court settlements.
However, during the trial process of the case at hand, the peoples’ court strongly affirmed that Bitcoin is virtual property, “because it has certain economic value and conforms to the property attributes,” creating a precedent that could inform future decisions or at best, soften China’s regulators’ crypto bearing.