Beijing Arbitration Commission: Bitcoin is protected by law but with one condition

Is Bitcoin protected by law in the country?

Recently, in a case involving a Bitcoin dispute entrusted for management represented by Liu Yang's team at Beijing Deheng Law Firm, the Beijing Arbitration Commission ruled that "the contract in this case is not an illegal contract, nor does it violate public order and good morals. It is not invalid, but a legal and valid contract."

The arbitration committee stated that " virtual currencies, including Bitcoin in this case, are virtual property and are protected by law ." Article 127 of the Civil Code stipulates that if the law has provisions on the protection of data and network virtual property, such provisions shall be followed.

The arbitration committee stated that the contract in this case is between natural persons, one party entrusting the other party to manage virtual currency, and the two parties are in a commission contract relationship, and the two parties agree that the trustee will manage the virtual currency for the entruster. The contract in this case is not an illegal financial activity or token issuance financing activity explicitly prohibited by the above documents.

In fact, similar arbitration has occurred before.

In 2018, the Ministry of Justice published an article on its official Weibo account titled "Shenzhen Arbitration Fills the Gap in Judicial Precedents! Confirming that Bitcoin Has Property Attributes and Is Protected." The event was called the "first Bitcoin arbitration case" and attracted widespread attention from the public.

However, two years later, the Shenzhen Intermediate People's Court made a ruling to overturn the above ruling. The reason was that the arbitration ruling in the case required Gao to compensate Li with US dollars equivalent to the value of Bitcoin, and then converting the US dollars into RMB was actually a disguised support for the payment and transaction between Bitcoin and legal currency.

It can be seen that Bitcoin’s attributes as virtual property are recognized by law, but it must not be involved in transactions. Legally, virtual currency transactions or use as a payment tool are not permitted.

As early as December 5, 2013, five ministries including the central bank jointly issued the "Notice on Preventing Bitcoin Risks").

The Notice clearly states that Bitcoin does not have the monetary attributes of legal tender and compulsion, and is not a real currency. The Notice also points out that Bitcoin transactions are a commodity trading behavior on the Internet, and ordinary people have the freedom to participate under the premise of assuming their own risks.

On September 4, 2017, the People's Bank of China and seven other ministries and commissions jointly issued the "Announcement on Preventing the Risks of Token Issuance and Financing", proposing that any so-called token financing trading platform shall not engage in the exchange business between legal currency and tokens or "virtual currency", 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".

The above document is also one of the bases for the Shenzhen People's Court to decide to overturn the "first Bitcoin arbitration case."

At this point, it is actually quite clear. Whether Bitcoin is protected by law in China depends on two aspects: first, from the perspective of property attributes, Bitcoin is protected by law; second, from the perspective of so-called "currency" attributes, it is not protected.

Treat Bitcoin as property or a commodity, and its value is actually the same as your mobile phone, computer, or TV.

However, you absolutely cannot regard Bitcoin as a "currency", exchange it for legal currency, or conduct public transactions with it. This is not allowed by law.

In fact, even in developed countries, such as Europe, the United States, Japan, and South Korea, Bitcoin has not been recognized as a legal tender . It has only been recognized as a digital financial product and allowed to be traded. Without legal tender status, Bitcoin cannot be truly circulated in the lives of ordinary people.

Although some states in the United States and some regions in Switzerland allow the use of Bitcoin to pay taxes, this is only a partial recognition of Bitcoin's monetary attributes and has not yet reached the level of national recognition.

Currently, El Salvador is the only country that uses Bitcoin as legal tender. Of course, some Mexican and American lawmakers are actively promoting the legal tender of Bitcoin, but it is difficult to achieve in the short term.