China’s central bank claims that cryptocurrency trading is banned but the Court of International Arbitration in Shenzhen declares that Bitcoin is to be given legal protection in China as ‘property’. The decision is an ongoing issue on a global scale as courts struggle with offering protection to something that is decentralised and designed to not obtain a clear ownership trail. The use of digital keys and wallets has no protection that could ensue a criminal investigation due to the very nature of the technology.
However, a complaint was raised with the court after the defendant refused to return the plaintiff’s cryptocurrency that it was holding and using to trade on with on the plaintiff’s behalf. The total value of the cryptocurrency in question was over half a million dollars and not something the plaintiff thought could result in court action considering a legal contract was signed and detailed on the arrangement between both parties. It appears that the defendant was of the impression that not only did he not have to adhere to the terms of the agreement and faulted on the agreed trading of the plaintiff’s 13 Bitcoin Diamond (BCD) 50 Bitcoin Cash (BCH) and 20 Bitcoins (BTC), but also retain the Bitcoin by refusing to return it on request.
A background of China’s approach on cryptocurrency has historically been problematic, culminating in the banning of cryptocurrency by the People’s Bank of China and making any such claim difficult to argue. In this instance the defendant responded to the claim by stating that if the cryptocurrency transactions or payments are considered ‘illegal’ then the whole agreement between the two parties would be void. The contract is essentially an invalid contract and not enforceable in a Court of Law.
The legal argument about the property ownership of Bitcoin however prevailed and the court held in favour of the plaintiff. It was held that the banning of cryptocurrency in China does not give anyone a right to steal and claim ownership over something which has been privately and contractually agreed in terms. It was stated that the use of an address and private key which was known by both parties meant that there was no reason why the defendant could not return the Bitcoin to the plaintiff. Specifically, it was stated:
“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…Bitcoin has the nature of a property, which can be owned and controlled by parties, and is able to provide economic values and benefits.”
Ultimately, China are the first to recognised Bitcoin as having the right of being considered as ‘property’ and opens up other claims of theft and abuse of power technologically by parties who think they can get away with transferring cryptocurrency without permission and financially gaining from this without a risk of being held to account.
Lawdit has a specialist team who can assist with any dispute or legal question on cryptocurrency or blockchain including if you have been subject to abuse of position with another party that hopes to get away with this type of matter as above.