Shanghai Court Rules Ethereum is Protected Under Property Laws
Shanghai Hongkou District Court has declared that Ether is protected as “general property” by law.
The statement was a result of an unjust enrichment case filed by a tech company in Beijing.
In September 2017,
crypto companies in China started closing their doors after China banned ICOs and crypto exchanges. Caught in the middle of the ban was a company, headquartered in Beijing, which had released its tokens to raise Ether and Bitcoin in August 8, 2017.
However, the company reimbursed the funds to investors as early as September 4, 2017. Four days later, the company sent 20
ETH to a man named Chen, instead of an investor, due to “operational errors”. The company reached out to Chen and tried to contact him through text messages and legal letters. When it was clear that Chen was unwilling to cooperate with the company, an unjust enrichment case was filed.
Chen was able to justify his position by pointing out that Ether, as well as other cryptocurrencies, were not recognized as legal currency. Furthermore, China had banned the circulation of these virtual currencies completely. However, the court clarified that while both these statements were true, the country still considered Ether to be protected under the property law. Therefore, in June 2018, the court ruled in favor of the company.
The lawyers representing the company listed three important points for such cases in the future. Firstly, even though cryptocurrencies are banned in China, the country still supports crypto unjust enrichment cases under the Civil Law.
Secondly, the accused must be identified by the court under the Civil Procedure Law. Since the use of cryptocurrencies allow people to remain anonymous, it can result in legal problems. In this case, the company must maintain a digital chain of custody, such that they are able to submit communication records (from social media applications) to the court. Luckily, the tech company had sent Ether from two different companies, Nanchang Digital Network Technology Co. Ltd. and Hangzhou Rongzhi Technology Co. Ltd., which helped them in winning the case. However, it is advised that transactions should be completed via crypto exchanges, which already require users to fill personal details.
Thirdly, if funds are transferred to an account located abroad, the laws of the place where unjust enrichment has occurred are used.