On the Change of the Legal Status of Virtual Currency under the Current Rules

# Blockchain2021-06-11 11:14 0 11,092 Source: Global Blockchain Compliance Alliance

With the development of blockchain technology, virtual currency has also aroused widespread discussion, especially the recent dramatic fluctuations in the price of Dogecoin and SHIB as representative currencies have once again pushed virtual currency to the forefront.

As one of the main applications of blockchain technology, the legal status of virtual currency varies. Take China as an example. In terms of policy, China has always been encouraging the development of blockchain technology, but it has adopted strict prohibitions on virtual currency-related industries and the issuance of tokens.

my country’s positioning of the legal attributes of virtual currencies has also changed accordingly.

The first stage: from clear to vague, evading the legal attributes of virtual currency

In 2013, the People’s Bank of China and other five ministries issued the “Notice on Preventing Bitcoin Risks” (hereinafter referred to as the “Notice”) which clearly stated:

“Bitcoin is not issued by the monetary authority, has no monetary properties such as legal compensation and compulsion, and is not a currency in the true sense. From a qualitative point of view, the article characterizes Bitcoin as a specific virtual commodity. The legal status equivalent to currency cannot and should not be circulated in the market as currency.”

At the time, virtual currency was clearly deterministic as a “virtual commodity.” In September 2017, seven departments, including the People’s Bank of China and the Central Cyberspace Administration of China, jointly issued the “Announcement on Preventing Token Issuance Financing Risks” (hereinafter referred to as the “Announcement”). The two documents have similarities in the same way. In essence, they are reminding the risks of virtual assets, but there are differences between the two. The most obvious difference is that the announcement issued three years later did not mention the legal attributes of virtual currencies. , And did not reiterate the “virtual commodity” attribute of virtual currency. This shows that my country’s regulatory authorities do not recognize or directly evade the legal attributes of virtual currencies.

The civil trial attitude after the announcement in September 2017 is the best proof. Take the case of a contract dispute between Wang Tieliang and Beijing Huobi Tianxia Network Technology Co., Ltd. and other companies as an example.

(2017) Beijing 0108 Minchu No. 12967

From October 2, 2016 to January 10, 2017, Huobi Company confirmed that Wang Tieliang had recharged a total of 1400001.85 yuan for bitcoin trading on Huobi.com.

Wang Tieliang believes that his behavior to recharge and purchase bitcoins on Huobi’s Internet trading platform is invalid because the subject matter does not exist. Bitcoin does not exist, nor is it a legal subject under the law. At the same time, Bitcoin is not issued by a monetary authority, has no monetary properties such as legal compensation and compulsion, and is not a currency in its true sense. Therefore, Wang Tieliang sued the court and demanded that the transaction with Huobi Company be an invalid contract.

The court held that the provisions of relevant laws and regulations in China show that Bitcoin is not issued by the monetary authority, has no monetary properties such as compensation and compulsion, and is not a real currency. However, there are no laws and regulations that explicitly prohibit parties from investing and trading in Bitcoin. , Wang Tieliang registered on Huobi.com sponsored by Huobi Company and invested in bitcoin trading. Huobi.com provides users with online trading platform services for digital asset trading activities, and does not participate in the trading of digital assets as a seller or buyer. Therefore, The relationship between Wang Tieliang and Huobi Company is a service contract, and the contract is valid.

Although the nature of virtual currency was not discussed in this case, from the perspective of civil law, the court recognized that virtual currency can be regarded as a kind of “virtual commodity” circulating in the market, so it will be determined based on the principle of contractual autonomy. The contract for currency transactions is valid.

However, the judicial decision after the announcement has changed.

(2018) Zhejiang 11 Minzhong No.263

In the second-instance civil judgment of Ding Jianqiang and Chen Yingguang on the sale and purchase contract dispute, the plaintiff Chen Yingguang paid the defendant Ding Jianqiang to purchase the mark on February 21, February 24, March 2, May 3, and June 17, 2016, respectively. Purchase 20,000 Mark coins in five times, for a total of 651,000 yuan. On June 18, 2016, after verification by both parties, Ding Jianqiang issued a receipt stating that he received the plaintiff Chen Yingguang in cash for a total of 651,000 yuan to buy 20,000 mark coins.

The plaintiff believed that the contract between the two parties was invalid and demanded that the defendant return the price.

The court held that because the mark currency, the subject matter of this case, was not issued by the monetary authority stipulated by my country, it has no monetary properties such as legal compensation and compulsion, does not have the same legal status as currency, and cannot and should not be used as currency in the market. . Due to the illegality of the subject matter involved in the case, and the transactions involving the subject matter are not protected by law, it was determined that the contract involved in the case was invalid and the defendant should return the appellee’s money.

The different judgments of similar cases at different nodes indicate that under the current rules, my country does not recognize or directly avoids discussions on the legal attributes of virtual currencies.

The second stage: once again clarify that virtual currency is a property right

In 2020, the “Civil Code of the People’s Republic of China” was promulgated, indicating that virtual currency in my country is a “civil interest” protected by law, and citizens can acquire and hold virtual currency. According to Article 127 of the “Civil Code”, where the law has provisions on the protection of data and network virtual property, follow those provisions. There is currently no clear definition of what is network virtual property. However, virtual currency, especially stable coins such as Bitcoin and Ethereum, as a virtual network property, has been recognized by the market and has a certain property value. It has preliminarily possessed various functions such as pricing, payment, storage, etc., and civil interests with property value should be protected by law.

In May 2021, the Intermediate People’s Court of Jinan City, Shandong Province wrote in the judgment (2021) Lu01 Minzhong No. 3796,

“BUT coin (a kind of virtual currency currency) has property attributes and belongs to network virtual property. BUT coin is an encrypted “currency” based on blockchain technology, which is generated by “miners” and “mining”, “miners” According to the open source software provided by the designer, a certain amount of computer computing power is provided. Through complex mathematical operations, the process of finding a special solution to the equation, the “miner” who has obtained the special solution gets a specific number of BUT coins as a reward. The physics of BUT coins The form is a series of complex digital codes.

To obtain BUT coins, it is necessary to invest material costs for the purchase and maintenance of special machinery and equipment with considerable computing power, and to pay the corresponding consideration for the loss of power and energy in the calculation of the machine. It also requires the corresponding time and cost. The process and the acquisition of labor products are condensed. The abstract human labor force. At the same time, BUT coins can be transferred online through money as consideration, and generate economic benefits. Therefore, BUT currency has the characteristics of value, scarcity, and disparity, has the characteristics of the object of rights, and conforms to the constituent elements of virtual property.

Article 127 of the newly promulgated and implemented “Civil Code of the People’s Republic of China” stipulates that if the law has provisions on the protection of data and network virtual property, the provisions shall be followed. This regulation reflects the law’s affirmative attitude towards the protection of virtual property on the Internet, and makes up for the gaps in the protection of virtual property in our country’s laws. Based on the legality of the subject matter, there is no prohibition on investing in BUT coins. “

It can be seen that my country recognizes the property attributes of virtual currency as a commodity, and citizens’ legal virtual currency property rights are protected by law. Special reminders are needed. Although my country recognizes that virtual currency has certain property attributes, my country still has a crackdown on virtual currency transactions. It believes that the transaction behavior of buying and selling virtual currency has seriously disrupted the economic and financial order and harmed the public interests of society. Virtual currency still has the possibility of not being supported in rights protection, and citizens still need to be cautious if they want to get involved.