Asia & Australia

November 01, 2018

Chinese laws do not prohibit Bitcoins from being privately held, transferred: SCIA


chineselaws

On October 25, the Shenzhen Court of International Arbitration (SCIA) set an important new precedent in China ruling that Chinese laws and regulations do not prohibit Bitcoins and its derivatives from being privately held and transferred.

The SCIA in a case involving almost half a million dollars in cryptocurrency attributed Bitcoin as a property that is indeed protected by law. The court said, the “case is a dispute over equity transfer, which is a new type of case because it involves special types such as BTC (Bitcoin), BCH (Bitcoin Cash), and BCD (Bitcoin Diamond).” The SCIA further noted that China has not clearly defined the legal attributes, concept, and delivery of Bitcoin at the legal and administrative levels.

The SCIA ruled that Bitcoin and other cryptocurrencies are valuable personal property and are therefore protected under existing Chinese law. The court further added that there is no law on the books prohibiting the possession or acquisition of cryptos.

The SCIA said, “There is no law or regulation that explicitly prohibits parties from holding bitcoin or private transactions in bitcoin, [only warnings to] the public about the investment risks.”

The court added, "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 SCIA determined that exchanges of Bitcoins between parties, independent of ICO financing activities, are allowable because of the nature of the cryptocurrency. Although China does not recognize Bitcoin as a legal currency, the court deemed it to have economic value to parties when exchanged. Moreover, despite the fact that Bitcoin and other cryptocurrencies exist in the virtual space, the SCIA reasoned that they have special characteristics in terms of possession, transferability, and means of delivery.

The SCIA concluded, “Under the current legal system, the [arbitration commission] affirmed the property attributes of Bitcoin in accordance with the provisions of the General Principles of the Civil Law, the ‘Contract Law’ and the contractual agreement, and the principle of good faith and the arbitration concept of respecting party autonomy.”

The SCIA (also known as the South China International Economic and Trade Arbitration Commission) accepts the following types of cases: International or foreign-related arbitration cases; arbitration cases related to the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and the Taiwan region; and Chinese Mainland arbitration cases. It is an arbitration institution founded to resolve contract disputes and other property rights disputes among individuals, legal entities, and other institutions from domestic China and overseas.

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