Compiled from: People's Court Daily, Civil Trial, Shandong High Court
 
Case review
On June 12, 2018, Yan, Fu, and Pete (U.S. citizen) had some economic disputes arising from business dealings. Yan and Fu found out where Pete lived, restrained his personal freedom, and used beatings and threats to force Pete to transfer 18.88 Bitcoins and 6466 Skycoins into an account designated by Yan.

 

After trial, the court determined that an economic dispute did exist between the parties, but there was no evidence proving that Pete was the party at fault. Yan and Fu stated during the trial that they voluntarily agreed to return the Bitcoins and Skycoins obtained from Pete. Ultimately, the court sentenced Yan to eight months' imprisonment and Fu to six months' imprisonment for the crime of illegal detention. However, Pete never received the Bitcoins and Skycoins that Yan and Fu promised to return, so Pete filed a lawsuit.
 
 
The court of first instance
After trial, the court of first instance held that a person who infringes upon another's civil rights due to fault shall bear tort liability. For property damage, the property loss shall be calculated based on the market price at the time of the loss or other methods. The court of first instance then ruled that Yan and Fu jointly return 18.88 Bitcoins and 6466 Skycoins to Pete; if unable to return, they shall compensate based on the closing prices of Bitcoin and Skycoin on June 12, 2018, as published by a cryptocurrency market website, and the USD exchange rate on that day, with Bitcoin at 42,206.75 yuan each and Skycoin at 80.34 yuan each.
 
Yan and Fu disagreed, arguing that current Chinese law does not recognize the property attributes of Bitcoin and Skycoin, and that they are not considered objects or property under Chinese law, so Pete does not have the right to claim return of property. They then appealed to the Shanghai First Intermediate People's Court.
 
 
The court of second instance
After trial, the Shanghai No. 1 Intermediate People's Court held that this case involves a dispute over compensation for property damage with foreign elements. The infringing act occurred within China, the habitual residences of both parties are within China, and the parties did not agree on the applicable law for the dispute, so Chinese law applies as the governing law for this case.
 
The Shanghai No. 1 Intermediate People's Court held that documents such as the "Notice on Preventing Risks of Bitcoin" (2013) and the "Announcement on Preventing Risks of Token Issuance Financing" (2017) issued by the People's Bank of China and other ministries did not deny the property attributes of Bitcoin as a commodity, and Chinese laws and administrative regulations do not prohibit the holding of Bitcoin. The "Notice on Preventing Risks of Bitcoin" further states that "by nature, Bitcoin should be a specific virtual commodity." Therefore, Bitcoin possesses the attributes of virtual property and virtual goods and should be protected by law. Ultimately, the Shanghai No. 1 Intermediate People's Court upheld the original judgment.

 

 
[1] The author's perspective
Bitcoin is an encrypted "currency" based on blockchain technology. It has no centralized issuer and is generated through specific computer program calculations. Although Bitcoin is called a "currency," it is not issued by a monetary authority, lacks the attributes of legal tender and compulsion, and is not a true currency. The aforementioned "Notice" and other documents also deny the legal status of such "virtual currencies" as currency, and Bitcoin and other "virtual currencies" cannot and should not be used as currency in market circulation.
 
Additionally, the "Notice" requires that at the current stage, financial institutions and payment service providers must not price products or services in Bitcoin, must not buy or sell Bitcoin or act as a central counterparty in Bitcoin transactions, must not underwrite insurance related to Bitcoin or include Bitcoin within the scope of insurance liability, and must not directly or indirectly provide other Bitcoin-related services to clients. It is evident that Bitcoin is highly unstable, and such a "virtual currency" without the support of any national government can never become a true currency.
 
To protect the property rights and interests of the public, safeguard the legal tender status of the Renminbi, prevent money laundering risks, and maintain financial stability, the author reminds investors to invest rationally, reasonably control risks, and protect their own property safety.