Introduction
Bitcoin has emerged as a prominent virtual asset, raising critical questions about its legal status and enforcement mechanisms. This article examines a landmark case from Shanghai that established Bitcoin's property attributes and created a framework for execution when direct return becomes impossible.
Core Keywords
- Virtual property
- Bitcoin execution
- Asset recovery
- Proportional compensation
- Cryptocurrency law
- Judicial enforcement
- Property rights
- Civil judgment
Case Overview: Cheng v. Shi
Key Details
- Court: Shanghai Baoshan District People's Court (2021)
- Claim: Plaintiff Cheng sought recovery of 1 BTC from defendant Shi
- Judgment: Court ordered Shi to return the Bitcoin within 10 days
Execution Challenges
- No BTC detected in defendant's digital wallets via national judicial inquiry systems
- Overseas exchange platform (where account was held) proved unreachable
- Defendant had transferred all BTC to an untraceable third party
Legal Framework
Bitcoin's Property Status
Chinese courts consistently recognize Bitcoin as:
- Valuable: Requires significant resources to mine
- Scarce: Algorithmically capped at 21 million coins
- Controllable: Can be owned, transferred, and exchanged
Supported by:
- Civil Code Article 127 (virtual property protections)
- Multiple Supreme People's Court precedents
Execution Principles
When return becomes impossible:
- Proportional compensation becomes primary remedy
- Mutual agreement on valuation takes precedence
- Public policy prohibits forced repurchase due to China's crypto restrictions
Judicial Process Breakdown
Investigation Phase
- Network inquiry systems proved ineffective for virtual assets
- Traditional methods (witness interviews, document requests) were employed
- Defendant's police report about stolen BTC was considered
Resolution Method
- Both parties acknowledged BTC couldn't be physically returned
- Agreed to compensation at original purchase price (¥84,000)
- Formalized through court-mediated settlement
Key Precedents Established
Virtual Property Confirmation
- Reinforced Bitcoin's status as protected asset under property law
Execution Alternatives
Created template for handling irretrievable crypto assets:
- Prioritize mutual settlement
- Allow proportional compensation
- Preserve right to litigate valuation disputes
Public Policy Safeguards
- Ruling avoids requiring BTC repurchase (prohibited under Chinese regulations)
Comparative Approaches
International Perspectives
| Country | Legal Status | Execution Method |
|---|---|---|
| China | Virtual Property | Proportional compensation |
| United States | Commodity | Direct seizure possible |
| EU | Transferable value | Varied national approaches |
Practical Implications
For Creditors
- Document original acquisition costs
- Promptly report suspicious transfers
- Consider contractual clauses specifying fallback valuations
For Debtors
- Maintain clear transaction records
- Report asset loss/theft immediately
- Engage proactively in settlement talks
FAQ Section
Q: Can Chinese courts force someone to buy Bitcoin?
A: No. Due to financial regulations, courts cannot order repurchase - only proportional compensation is permitted.
Q: What happens if parties disagree on valuation?
A: The case must return to litigation for judicial determination of appropriate compensation.
Q: How are overseas crypto exchanges handled?
A: Chinese courts face practical challenges when platforms lack domestic presence, emphasizing the need for early asset preservation.
Q: Does this ruling affect other cryptocurrencies?
A: Yes. The principles apply equally to other virtual assets meeting the property criteria.
Q: What if the Bitcoin later reappears?
A: The settlement agreement would govern - most specify final resolution unless new fraud evidence emerges.
👉 Understanding Crypto Regulations Globally
Conclusion
This landmark case provides crucial guidance for virtual asset disputes in China's legal system. By establishing clear protocols for Bitcoin execution while respecting financial regulations, it balances creditor protection with public policy concerns. The emphasized preference for negotiated settlements offers a pragmatic approach to this evolving legal challenge.