Shanghai High Court: Bitcoin is virtual property and is subject to property rights laws and regulations

Overnight, Bitcoin (BTC) continued to fall to the 28-29k range, showing signs of breaking the sideways trend for more than ten days. Many people have begun to prepare for the bear market winter. But in any case, the trough - no matter how long or short - is a good opportunity to accumulate low-priced chips.

Earlier this month, the Shanghai High Court published a judicial case involving Bitcoin[1]. This was the first case involving Bitcoin published in the name of a high court in China.

The case comes from the People's Court of Baoshan District, Shanghai. The lawsuit took place in October 2020. The court made a civil judgment in February 2021.

The case is very simple: Zhang San sued Li Si, demanding that the defendant Li Si return a bitcoin that he borrowed. The court ruled in favor of Zhang San's claim and required Li Si to return one bitcoin to Zhang San.

However, the most difficult part of a legal issue is not the judgment, but the execution. If a judgment is made but cannot be executed, then the seriousness of the legal provision will no longer exist. Conversely, it is better not to define the legal provision in this way, so as to avoid hitting a wall and damaging the dignity of the law.

Therefore, the basis of legislation is public opinion, but it is ultimately constrained by executive power.

This is why the domestic laws of the United States can be applied globally and exercise long-arm jurisdiction. It is a joke for a small country to make a law, such as a country attacked by one of the five permanent members of the UN Security Council, to define what crime the other party has committed.

The reason we have the Anti-Secession Law today is that the PLA is capable of defending any territory we wish to defend, including some territories that have not yet been returned or liberated, in the event of U.S. military intervention. Without this strength, the legal provisions would be a joke in the eyes of the powerful.

Why is Bitcoin itself not illegal in most countries around the world? It’s not that these countries are kind to Bitcoin. It’s not that they don’t want to, but they can’t. There are countries that have tried to declare Bitcoin itself illegal, but they soon realized the difficulties of law enforcement and gave up.

This tactic of trying to stop a chariot with a mantis arm is as ridiculous as the Americans enacting an "Anti-Earth Attack Law" to prevent the Trisolarans from attacking the Earth, or as ridiculous as the Empress Dowager Cixi declaring war on a dozen imperialist countries at the same time.

More importantly, as Professor Luo Xiang said, something that is accepted by the general moral life of the people must not be illegal.

If it cannot be made to disappear through legislation, then its existence and legal characterization must be considered.

In the article "Does Bitcoin Have Property Attributes? How to Implement Return and Delivery? | Case Reference Book" published by the Shanghai High Court, the relevant knowledge is well introduced. I strongly recommend readers to read it carefully.

In the section “(I) Unraveling the mystery: Legal recognition of Bitcoin under multiple theories”, several theories on the legal nature of Bitcoin are briefly introduced, including: property rights theory, debt theory, intellectual property rights theory, and new property theory.

I remember reading a long and moving article that recalled the twists and turns of Chinese lawyers’ final decision on the property rights theory in Bitcoin. Among them, a respectable old gentleman and expert—I’m sorry I forgot his name (if any friends remember, please tell me, thank you)—played an important role. Let us always thank them for helping us stand on the right side of history.

Property rights are the most sacred rights among all rights. The technical characteristics of Bitcoin have brought this right to its extreme. Bitcoin can be established as a kind of virtual property. The people's rights to Bitcoin are protected by Article 127 of the Civil Code of the People's Republic of China.

The above is nothing new. In the case published by the Shanghai High Court, there are two points that are particularly inspiring in my opinion:

The first point is the technique of ensuring that the contractual provisions do not violate other laws and regulations.

The loan contract between Zhang San and Li Si adopts the principle of "1 BTC = 1 BTC". In other words, the loan is 1 Bitcoin, and the agreed repayment is also 1 Bitcoin. There is no agreement on the repayment of legal currency, or how to price it. This is very critical.

If their contract involves pricing Bitcoin in fiat currency, it will inevitably violate the provisions and requirements of the "Notice on Preventing Risks of Token Issuance and Financing" (2017 "94 Document"), "Notice on Preventing Risks of Virtual Currency Trading Speculation" (2021 "924 Document") and other documents. Because the price cannot be set, it will be deemed an invalid contract by the court. Such cases have occurred many times.

An agreement to borrow and repay Bitcoin on a one-for-one basis only requires the support of Bitcoin's property rights nature, which lays the foundation for the contract to obtain legal support.

The second point is the problem-solving skills during implementation.

After the court issued the execution order, a series of actions were taken to verify whether Li Si actually had a bitcoin. If it was impossible to verify that Li Si actually had a bitcoin, then Li Si could not be required to purchase a bitcoin based on the "94" or "924" documents. What could be done?

The court adopted a civilized solution: mediation. On May 27, 2021, the court organized the two parties to conduct an execution settlement. Zhang San acknowledged that Li Si had no bitcoins. Both parties agreed to the settlement:

First, Zhang San no longer asks Li Si to return a bitcoin.

Second, after negotiation, both parties agreed that Li Si would compensate Zhang San with RMB 84,000, the purchase price when Zhang San lent the property.

Third, if Li Si fails to perform by then, Zhang San can assert his rights separately.

In this way, the dignity of the law is maintained, the problems of Zhang San and Li Si are solved, and the property nature of Bitcoin is affirmed.

Of course, this does not mean that Bitcoin is a currency, nor does it mean that illegal fundraising with Bitcoin will not violate the judicial interpretation of the criminal law, nor does it mean that buying and selling Bitcoin as a central counterparty and making profits from it as a large number of non-specific personnel will not violate the relevant provisions of "Document 94" and "Document 924".

However, for personal transactions and storage of a small amount of Bitcoin, the Shanghai High Court's case confirmed that these personal actions are protected by law.

References:

- [1] “Does Bitcoin have property attributes? How to implement return delivery? | Case Reference Book” https://mp.weixin.qq.com/s/4KH68E0MVhxjgyeWgJAHOA