Chinese cryptocurrency investors got a boost after a Chinese Arbitration body declared that bitcoin requires legal protection as property. The Shenzhen Court of International Arbitration case analysis published on Oct.25, 2018 via WeChat determined that:
“Bitcoin has the nature of a property, which can be owned and controlled by parties, and is able to provide economic values and benefits.”
The case analysis detailed the ruling on a recent economic dispute relating to the possession and transfer of cryptocurrencies.
An unnamed plaintiff signed a contract with the defendant to allow the latter to trade cryptocurrencies on behalf of the plaintiff. However, the defendant refused to return the cryptocurrencies after the agreed timeline. As a result, the plaintiff brought the case for arbitration, to demand his assets and interest.
According to the plaintiff, the disputed cryptocurrencies include 50 bitcoin cash, 20.13 bitcoin, and 12.66 Bitcoin Diamond. The total value of the cryptocurrencies is approximately $493,158.
For clarity, China does not have a specific law governing cryptocurrencies. Therefore, the award by the arbitrator provides a window of opportunity for future legislation on this emerging technology.
According to the defendant, the fact that there is a ban on cryptocurrency trading in China means that crypto payments are illegal. Logically, therefore, the contract between him and the plaintiff is invalid.
Further, the defendant asserted that the trading ban provided no avenue of trading. Moreover, the plaintiff could not find a channel of sending assets to the plaintiff.
The Ruling by the Arbitrator
However, the arbitrator dismissed the arguments by the defendant. The arbitrator argued that the case involved a contractual obligation to return cryptocurrencies. The contractual obligation does not fall under cryptocurrency trading or ICO categories outlined in the government ban.
Further, the arbitrator noted that Chinese law neither prohibits the possession of bitcoin nor its transactions among individuals. Additionally, the arbitrator was categorical that sending bitcoins wasn’t a problem if one has an address and private key.
“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,” the arbitrator added.
The Arbitrator concluded that whether bitcoin is a legal tender or not is immaterial in the case. The fact of the matter is that bitcoin has to be protected according to China’s Contract Law.
The award from an arbitrator is essential in future Chinese legislation on cryptocurrencies. China legally mandated city governments to form arbitration committees in 1995 to rule on contact issues in the realm of finance, business and real estate.