Legal Research | Can Bitcoin be inherited? Is it protected by law?

Both the General Provisions of the Civil Law and the soon-to-be-implemented Civil Code have an open attitude towards the protection of data and network virtual property. According to current legal provisions, does Bitcoin belong to virtual property protected by law? Is it legally feasible to "inherit Bitcoin from ancestors" or "leave Bitcoin to the next generation", which is often ridiculed by everyone? Below we will interpret the above questions one by one.

Since October, the price of Bitcoin has been rising day by day, reaching a high of $19,888, while the highest point in Bitcoin's history was $19,875. This price increase has broken the historical highest price of Bitcoin.

On January 3, 2009, Satoshi, the founder of Bitcoin, created, compiled, and packaged the first open source code on a small server in Helsinki. The first block in the Bitcoin world was created, and Bitcoin was born.

Later, for quite a long time, Bitcoin was worthless in the eyes of ordinary people. On May 22, 2010, Laszlo Hanyec, an early Bitcoin miner and programmer, successfully bought two pizzas with 10,000 Bitcoins. Probably no one would have thought that ten years later, Bitcoin would rise to $20,000, and these two pizzas would be worth $200 million.

There are countless similar examples in the cryptocurrency world.

According to data from Glassnode, an authoritative blockchain data platform, as of November 4, the number of addresses holding 1 BTC or more has reached 824,193, breaking the historical record. The previous historical high was 824,160 on September 17.

Due to large price fluctuations, different people buy Bitcoin at different prices. Old people in the cryptocurrency circle who have held Bitcoin for a long time will joke that what they hold are "heirloom Bitcoins" and "leaving my Bitcoin to future generations"... Although these are all jokes, whether Bitcoin can be inherited is a very serious legal issue.

Let’s first take a look at what are the current legal provisions regarding Bitcoin so far?

The only document in my country's current legal provisions that mentions the nature of Bitcoin is the "Notice on Preventing Bitcoin Risks" (hereinafter referred to as the "Notice"), which was issued on December 5, 2013 by the People's Bank of China and five other ministries.

The Notice mentioned: "Bitcoin has four main characteristics: no centralized issuer, limited total volume, no geographical restrictions on use, and anonymity. Although Bitcoin is called "currency", it is not a real currency because it is not issued by the monetary authority and does not have monetary attributes such as legal tender and compulsion. In terms of nature, Bitcoin should be a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market."

At the same time, the central bank’s announcement also pointed out:

"However, as a commodity trading activity on the Internet, ordinary people have the freedom to participate in Bitcoin trading at their own risk."

In addition, on September 4, 2017, the People's Bank of China and seven other ministries and commissions issued the "Notice on Preventing Risks in Token Issuance and Financing" (hereinafter referred to as the "September 4 Notice"), which stated: "The tokens or "virtual currencies" used in token issuance and financing are not issued by monetary authorities, do not have monetary attributes such as legal tender and compulsory nature, do not have the same legal status as currency, and cannot and should not be circulated and used as currency in the market."

The 94th Announcement also emphasized: "From the date of this announcement, any so-called token financing trading platform shall not engage in the exchange of legal currency and tokens, "virtual currency" between each other, shall not buy or sell tokens or "virtual currency" or act as a central counterparty to buy or sell tokens or "virtual currency", and shall not provide pricing, information intermediary and other services for tokens or "virtual currency".

Although the “Notice” explicitly denies the legal tender status of Bitcoin, it does not restrict ordinary people from holding and trading Bitcoin. The “September 4th Announcement” also prohibits the issuance of tokens for financing and the corresponding trading platforms and payment settlements, and does not deny the existence of Bitcoin as virtual property.

From the perspective of effectiveness level, the above-mentioned "Notice" and "September 4th Announcement" should both be classified as departmental regulations. If you want to further understand the substantive content of the announcement, you can refer to Lianfa's previous articles.

That is to say, from a legal perspective, Bitcoin is a specific virtual commodity, namely virtual property.

On January 1, 2021, the Civil Code of the People's Republic of China (hereinafter referred to as the "Civil Code") will be officially implemented, and at the same time, the "Inheritance Law of the People's Republic of China" will be abolished. According to the Civil Code and the above-mentioned "Notice" and "No. 4 Announcement", when answering the question "Can Bitcoin be inherited?", we need to understand two questions clearly:

First, does the Civil Code protect virtual property? (Or does the law protect virtual property?) and the legal attributes of Bitcoin. Second, does Bitcoin fall within the scope of "inheritance"?

o1Does the Civil Code protect virtual property? What are the legal attributes of Bitcoin?

Article 127 of the Civil Code is about the protection of data and network virtual property. It stipulates that "where the law has provisions on the protection of data and network virtual property, such provisions shall be followed."

In the Understanding and Application of the Civil Code of the People's Republic of China (hereinafter referred to as "Understanding and Application"), published by the People's Court Press and compiled by the Civil Code Implementation Leading Group of the Supreme People's Court, there is a clear interpretation of this article. It is clearly stated:

This article is a leading provision on data and network virtual property, but it declares the protection of data and network virtual property and provides a legal basis for the subsequent special law. The Civil Code retains this provision of the General Provisions of the Civil Law.

"Understanding and Application" points out: "The above provision is a provision of epoch-making significance. The 21st century is the Internet era. New technologies represented by key technologies such as cloud computing, big data, 5G, artificial intelligence, and blockchain have and will continue to have a huge impact on the modern economy and society."

The Understanding and Application also points out that data and virtual network property are a special type of property with the following characteristics: (1) It is legally disposable and exclusive. Both data and network virtual property are virtual properties based on data, and the right holder can exclusively possess, control and use them. (2) Data and network virtual property have economic value. The data and network virtual property protected by the civil law are obtained by the right holder through legal labor, are interchangeable, and have certain economic value. (3) Although data and network virtual property are intangible in themselves, they also have a certain "tangible" existence in cyberspace. This "tangibility" is relative to the cyber world and does not exist in reality. After all, data storage requires space, and network virtual property also has space for activity.

It is not difficult to see that Bitcoin clearly meets all of the above characteristics.

Of course, virtual property protected by law should also have the characteristic of "legality" - the creation and acquisition of virtual property should comply with the provisions of the law.

That is, virtual property should not be prohibited or restricted by Chinese laws, nor should it contain pornographic, violent, reactionary, etc. content. At the same time, the legality of virtual property is also reflected in the legality of the way it is obtained. Neither the aforementioned "Notice" and "94 Announcement" nor other legal provisions stipulate that digital assets such as Bitcoin are illegal.

At present, Bitcoin has legal characteristics. In other words:

As a virtual property, Bitcoin is protected by law.

In fact, apart from the "legality" of property and some exclusionary provisions in the Civil Code, all personal property can be used as inheritance. This positive and general provision of the law has greatly expanded the scope of inheritance, including all existing property such as real rights, debts, intellectual property rights, and equity, and has also left enough room for new types of data property rights such as network virtual property rights that have already appeared or may appear in the future.

On December 8, 2020, the official WeChat public account of the Supreme People's Court announced the "List of Winners of the 2020 Excellent Case Analysis Selection Activity of the National Court System", which was hosted by the Supreme People's Court. Among them, the "Li Shengyan, Brandon Smidt v. Yan Xiangdong, Li Min and Others Property Damage Compensation Dispute Case - Legal Attributes of Bitcoin and Its Judicial Remedies" written by Judge Liu Jiang of the Shanghai No. 1 Intermediate People's Court stood out from the 2,745 excellent case analyses initially evaluated and recommended by various higher people's courts, and was selected as the 2020 Excellent Cases of the National Court System.

Because when the Supreme People's Court selects cases, the main factors it considers include the judgment results and the correct application of the law, the typicality and guidance of the case, the essence of the judgment and the writing of the case annotations, etc., to some extent, this also means:

The judgment in this case, including the identification of the property attributes of Bitcoin and the judicial relief for Bitcoin-related cases, has been recognized by the Supreme People's Court. Its typicality and guidance will also have a far-reaching impact on the national court system in the future trial practice of Bitcoin-related cases.

In addition, in the first case of Bitcoin network infringement represented by the Chain Law Law Team, the Hangzhou Internet Court identified the property attributes of Bitcoin and made a detailed discussion.

In making the ruling, the court cited the protection of data and network virtual property in the General Provisions of the Civil Law. In addition, the property attributes of Bitcoin were elaborated in detail from the aspects of value, scarcity, and disposability. That is:

The process of obtaining Bitcoin condenses the abstract labor of human beings - value; the total amount of Bitcoin is constant at 21 million - scarcity; Bitcoin can be possessed, used, benefited from, and disposed of - exclusivity and disposableity.

The aforementioned cases have in fact established the important content that "Bitcoin should be protected as virtual property."

o2Does Bitcoin fall within the scope of “inheritable inheritance”?

Article 124 of the Civil Code provides that: "Natural persons enjoy the right of inheritance in accordance with the law. The lawful private property of natural persons can be inherited in accordance with the law."

The right of inheritance is an important civil right in the Chinese civil law. The so-called right of inheritance refers to the right of a natural person to inherit the estate of the deceased according to the provisions of the law or the legal and valid will made by the deceased, or the qualification to accept the estate of the deceased. When certain legal facts are met, the heir has de facto property rights to the estate left by the deceased. The realization of the right of inheritance begins when the deceased dies or is declared dead.

At the same time, Article 1122 of the Inheritance Code of the Civil Code stipulates: "Inheritance is the personal legal property left by a natural person at the time of his death. Inheritance that cannot be inherited according to the law or due to its nature shall not be inherited. That is: only personal legal property can be inherited.

According to the interpretation of "Understanding and Application", the legal property referred to in this article means that the legal summary of the inheritance must include the limitation of legality. Only legal property can be inherited as the legacy of the deceased. In short, only legal property can become inheritance. If the so-called inheritance is obtained by the deceased through illegal means such as robbery, theft, fraud, etc., then these properties shall not be regarded as inheritance.

As we have mentioned above, Bitcoin has legal characteristics. So we conclude:

Bitcoin can be inherited.

Of course, in the world of blockchain, whoever controls the private key and address controls the Bitcoin.