The highest local court in the Shanghai province of China has published an analysis of a lawsuit first filed with a lower district court in October 2020. The plaintiff, Cheng Mou, demanded that one Bitcoin be returned to him by the defendant Shi Momou. It wasn’t revealed how it came into Momou’s possession.
The court ruled in favor of Mou, but Momou refused to comply. As a result, the case moved up to the High People’s Court, which also sided with Mou. Since Bitcoin has “value, scarcity, and disposability,” the High People’s Court ruling said, it should be regarded as “virtual property,” hence falling under the “legal norms of property rights.” In other words, seizing someone’s Bitcoin is equivalent to stealing someone’s car.
On-site examination
The case analysis suggests that Chinese authorities stumbled upon a number of issues establishing whether Momou has any Bitcoins for execution.
The case analysis concluded that in the case of digital assets, a “network inspection” is insufficient, because it can only trace conventional property such as fiat money, cars, and securities. That’s why the court analysts stressed the importance of “traditional surveys,” which could go as far as inquiries and even on-site examination, possibly setting a precedent for more aggressive investigations into digital assets ownership.
In the end, it turned out that Momou had transferred all of his Bitcoins to “outsiders,” who were “nowhere to be found.” As a result, Momou had no Bitcoins available to satisfy the court’s ruling. The parties then agreed to negotiations, during which Mou gave up his initial demand and agreed to a compensation in Chinese yuan.
Mixed signals
At first sight, the Shanghai High People’s Court’s opinion looks positive, but it could spell trouble as a basis for more decisive methods of executing the Chinese crypto ban. The case points to a growing headache Chinese authorities suffer as they attempt to insulate the country from a digital industry as large as crypto.
Since 2013, China has prohibited all forms of crypto trading and fundraising, which gradually forced major crypto companies, including Binance, to pack their bags. In 2021, the People’s Bank of China declared all “virtual currency-related business” conducted in China as “illegal financial activities.”
These actions brought the trading volume of Bitcoin in the Chinese yuan from over 90% in 2016 to just about 0 in 2018.
The Mou v. Momou case analysis does nothing to distance itself from the broader crypto ban, reaffirming that Bitcoin is “not a currency in the legal sense” and referencing the 2013 "Notice on Preventing Bitcoin Risks," which justified the initial crackdown.
The full impact of the court’s decision on China’s underground crypto space remains to be seen.
