The Shanghai Second Intermediate People’s Court in China has clarified that Bitcoin (BTC) is distinctively recognized as a virtual asset due to several factors, including its limited availability.
On September 25, the court released a study titled “Legal Characteristics and Judicial Handling of Digital Currencies.” This document underscores the challenges faced in legal proceedings when comparing digital assets and currencies to conventional properties.
The report indicates that, among various digital assets, Bitcoin is uniquely positioned as an irreplaceable cryptocurrency.
The court’s decision was influenced by specific characteristics of Bitcoin, such as its limited supply, intrinsic value to its owners, its fluidity in transactions, and ease of storage.
Observers have pointed out that such pronouncements from Chinese courts present a conundrum, given the comprehensive prohibition put forth by the Chinese government in 2021.
Historically, Chinese courts have offered multiple reasons supporting Bitcoin’s classification as property, drawing from its inherent value and practical applications.
This month, a Chinese People’s Court issued a document discussing the legal status of digital assets. It emphasized that such assets are shielded by the law and are thus recognized as legal property.
Additionally, the court provided guidance on navigating criminal and civil proceedings given the unique attributes of virtual assets. It mentioned that in certain scenarios, funds associated with these cases might not be seizable. As a result, it recommended that criminal and civil matters should be adjudicated separately.
This recent ruling from the Shanghai court emerges amidst a period when the region is delving into crypto assets and web3 technologies, even as mainland China maintains its stance against private digital currencies.
Bitcoin and justice dilemma
According to the report, the court elaborated that the diverse characteristics of cryptocurrencies have resulted in varying interpretations of the law by different courts, particularly when determining their value.
To illustrate this complexity, the court cited two distinct cases. In the first instance, Tether amounting to 12 million yuan was illicitly acquired and subsequently used to gain a profit of 900,000 yuan. The court resolved to define the crime based on the stolen amount.
Conversely, in the second case, while the defendant was accused of pilfering Bitcoin, the conviction was made on the grounds of unlawfully accessing computer data. Through these cases, the document aims to spotlight the multifaceted nature of digital assets and the challenges they pose to the judicial system.
The document highlighted that primary challenges for courts revolve around methods of confiscation and the process of transferring assets. In the context of traditional assets and tangible property, confiscation is typically direct. However, with virtual assets, the seizure is not always feasible unless the defendant provides the necessary keys, turning the process into a two-sided affair.
Given the recent advancements in the web3 sphere in Shanghai, some analysts speculate that this could serve as a pilot or testing ground for broader web3 initiatives in mainland China.