Shanghai Court Rules Ethereum is Protected Under Property Laws

While declaring their verdict over an unjust enrichment case filed by a tech company in Beijing, the Shanghai Hongkou District Court pronounce that Ether is protected as “general property” by law.

It all started when China enforced a ban on ICO’s and crypto exchanges in September 2017. A tech company based in Beijing, who released its tokens to raise Ether and Bitcoin on August 8, 2017, had to reimburse their investors. While doing so the company mistakenly transferred 20 ETH to a man named Chen, instead of an investor. The company tried to correct the mistake caused due to “operational errors” but Chen did not reply to the company’s text messages and legal letters.

Seeing no options as Chen wasn’t cooperating, the company filed an unjust enrichment case against him. Chen justified his position by stating that cryptocurrencies including Ether are not recognized as a legal currency. He added that China has banned the circulation of these virtual currencies completely.

While the court affirmed his arguments as true, it decreed that Ether is still protected under the property law and thus in June 2018, the court ruled in favor of the company.

Key inferences

The lawyers representing the company drew three key inferences for future cases.

•  Though China has banned cryptocurrencies, the country’s law will still support crypto unjust enrichment cases under the Civil Law.

• It is of importance that the accused must be identified by the court under the Civil Procedure Law. Since cryptocurrency lets the user remain anonymous a legal problem may arise. To avoid the same companies must maintain a digital chain of custody that can be presented to the court. It is advisable to transact via crypto exchanges, which already require users to fill personal details. The Beijing base company was lucky as it sent Ether from two different companies, Nanchang Digital Network Technology Co. Ltd. and Hangzhou Rongzhi Technology Co. Ltd, both of whom aided the company in winning the case.

• In case of funds being transferred to an offshore account, the laws of the place where unjust enrichment has occurred are used.

While the Chinese government maintains an aversion to cryptocurrency, the legal system still recognizes them in order to prevent unjust. In September 2018, China’s Supreme Court stated that blockchain evidence is now legal and admissible in court.

Read more: Despite Crackdown, China Observes A Rise In Bitcoin And Crypto Adoption