According to Shanghai Hongkou District Court’s statement in a recent crypto-related case, Ethereum and other virtual currencies are not considered as money. However, they are still protected by the law which views them as “property.”
Old Case Brings New View on Cryptos in China
One of the attempted crypto transaction between an individual investor and a Beijing-based technology company ran into multiple difficulties. So many, in fact, that the company eventually demanded the transaction to be reversed. As the investor refused to respond to the company’s attempts to contact, the incident was brought to the attention of the Shanghai Hongkou District Court.
The incident includes several events, dating as far back as August 2017, when the mentioned company issued tokens to raise Bitcoin and Ether. Less than a month later, on September 4, they decided to return the raised funds in Ethereum to one of the investors as a response to the new rectification requirements issued by the state. Additionally, there were operational errors with the account of another investor that the company attempted to return Ethereum to.
After the company uncovered the situation, they attempted to contact the investor and request a refund, but this individual refused to communicate. The company believed that the payment they made for the amount of 20 ETH was performed wrongly, which is why they requested a refund. But, since the investor refused to cooperate, the incident quickly became a District Court case.
Court’s initial decision is that the company’s request is justified and that they have the right to request the return, according to law. This was insufficient for the investor, who claimed that the country’s ban on Ethereum circulation should be taken into account. This would mean that there is no legal basis for the case.
According to the court’s new decision, Ether can still be protected by the law as property, regardless of the ban on its circulation.
Shanghai Hongkou District Court: Ether ($ETH) as a property in the general legal sense is under the protection of the laws.
— cnLedger (@cnLedger) September 28, 2018
Court has defended this by making several points. The first one is that, while it is true that cryptocurrencies are not recognized as monetary attributes, it is not denied that Ethereum can be protected by the law as property. Secondly, the case is based on the claim of unjust enrichment, meaning that someone took advantage of a platform error to obtain benefits and harm another.
When hearing a case involving the ownership of 20ETH, the court states: China does not recognize the monetary properties of “virtual currencies” including Ether. However we cannot deny the fact that Ether should be protected by law as a general propertyhttps://t.co/AnK7QlocGz
— cnLedger (@cnLedger) September 28, 2018
According to the current law, after mistakenly transferring the virtual currency, its recipient can be asked to return the property, which, in this case, involves 20 ETH. If the other party refuses to cooperate, the first party has the right to sue. Therefore, the investor’s argument regarding the lack of the legal basis for the lawsuit was rejected.
Majority of the issues that arose from the incident could have been prevented if there were proper regulations, which was not the case at the time of the incident. The situation may have been even worse for the affected company. Since the users of the exchange platform are capable of creating an account based on nothing but an alias, it can be next to impossible to file a case against an individual if this kind of an incident were to repeat.
This time, the company was fortunate that the investor used its name for their trading account. Similar cases that might occur in the future will likely not result in a similar outcome.