Bitcoin finally has a proper legal status
But only in China. A judge from China’s Hangzhou Internet Court ruled that Bitcoin is virtual property and is owed the same protections as physical property. The ruling applies to all cryptocurrency assets. While the crypto itself may be legal, trading crypto for fiat and ICOs are still illegal under current Chinese law, and the Chinese government is looking to eliminate crypto mining as well. (Chinese miners are estimated to contribute about 40% to the overall Bitcoin hash rate.)
Court ruled that Bitcoin is virtual property
How did this happen?
China has been something of a trend-setter for digital law, starting with the founding of internet courts (courts tasked explicitly with handling online and digital cases). The Hangzhou Internet Court, in particular, is one of three internet courts in the country and had previously ruled that blockchain data is permissible as evidence. This case stems from a dispute between a user of a now-shuttered exchange - the user stored their BTC on the exchange, and lost access to it after the exchange was shut down. While they didn’t win the case, the court did confirm Bitcoin’s status as property.
So what does being property actually mean?
The recent ruling allows Bitcoin holders to now benefit from the same protections against theft, fraud, and damages as traditional commodities and property in China. On the other hand, the Chinese legal system is based heavily on Soviet jurisprudence, where the law works in a much more top-down fashion than US and UK common law systems, or even European civil law systems, so a regional court ruling may not change much. Internationally, however, the verdict means almost nothing - China is not usually taken as a source of international law, due to the highly politicized nature of its rulings.
a regional court ruling may not change much
How did the markets react?
If traders were enthusiastic about this development, it didn’t show in the price. Volatility has hit a bit of a lull, with prices hovering between $9,500 and $11,000 for the past week, more or less in line with the sideways movement seen recently. Some of this uncertainty may have to do with politics - while China recognized Bitcoin as property, India has indicated it may ban crypto altogether.
What We Think
China recognizing Bitcoin as property may have less of an effect than some may hope, but it does signal a normalization of crypto in a time when Facebook’s Libra is coming under heavy regulatory scrutiny.
With the price having fallen beneath the crucial $10,000 support, we may even be in for more short-term drops below $9,000 as bears set bearish lower highs. But little has changed for the long-term outlook: the Bitcoin network itself is even stronger than during the $20,000 peak, and the halving is still coming and is nearly guaranteed to raise the price. That shows that despite any momentary news or blips, Bitcoin is expected to increase going forward.
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