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May 6, 2022

China Relationship With Crypto Takes a Dramatic Turn

A high court in Shangai, China largest city and a global financial center, has recognized Bitcoin as property under Chinese law, putting the government against its own anti-crypto stance.

According to a report released on Thursday, May 5, by the Shanghai Baoshan District People’s Court, Bitcoin, as a virtual property, has property features and is governed by property rights rules and regulations.

In issuing the declaration, the court alluded to a case where a plaintiff, Cheng Mou sued the defendant, Shi Moumou on October 10, 2020, asking the return of one bitcoin to him. Following the entry of the verdict, the defendant failed to return the bitcoin, causing the plaintiff to seek execution.

The defendant was sent with an enforcement notice, but he still defaulted, saying that he did not have any Bitcoin. While retrieving the Bitcoin proved difficult due to the secrecy of transactions, the court went on to say that Bitcoin has value scarcity characteristics.

As such, it possessed the characteristics of a right object and satisfied the requirements for the composition of virtual property. As a result, the court had the competence to carry out enforcement and disposal processes in accordance with property rights legal standards.

Bitcoin is now prohibited from trade in China following a purge that began last year with proof-of-work mining. The legal applicability of Bitcoin enforcement has remained murky due to the lack of related rules and regulations, making it difficult for courts to enforce decisions.

While Article 127 of the People’s Republic of China’s Civil Code makes it apparent that virtual property is protected by law, it lacks precise regulations on its concept and application. As a result, most courts have remained arbiters in crypto-related matters, encouraging parties to bargain for reduced compensation or proposing out-of-court settlements.

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