Short author bio : usp_custom_field : Jurist | Entrepreneur | Business Owner
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- The legal nature of bitcoin: Does bitcoin have property rights? - April 23, 2018
The legal nature of Bitcoin under financial and property law has been uncertain since its very beginnings. On 20 March 2018, the Dutch Court of Amsterdam may have set the precedent for legal recognition of bitcoin contracts. According to the Dutch Court judgement, bitcoin possesses the characteristics of property rights. Could this be a game changer for the legal framework that governs contractual agreements? Maybe, but we cannot forget that, back in 2015, the Court of Justice of the European Union had a different point of view about the legal nature of bitcoin in relation to property rights.
Bitcoin’s legal nature
The dispute that arose in February of 2018, between the claimant Mr. J.W. de Vries and the crypto-mining firm called Koinz Trading BV as defendant, brought an important issue of civil rights to judgment.
The claim filed by Mr. J.W. de Vries requested repayment of 0.591 BTC (bitcoins) obliged by the contract between him and Koinz Trading BV. The Dutch Court of Amsterdam ruled in favor of the claimant, stating that bitcoin meets all of the criteria that allow classification as a property right.
As stated in an article released by Bitcoin.com, the ruling mentions:
“Bitcoin exists, according to the court, from a unique, digitally encrypted series of numbers and letters stored on the hard drive of the right-holder’s computer. Bitcoin is ‘delivered’ by sending bitcoins from one wallet to another wallet. Bitcoins are stand-alone value files, which are delivered directly to the payee by the payer in the event of a payment. It follows that a Bitcoin represents a value and is transferable. In the court’s view, it thus shows characteristics of a property right. A claim for payment in Bitcoin is, therefore, to be regarded as a claim that qualifies for verification.”
The same article indicated that the Court of Amsterdam backed their mentions by making the following references:
“At the hearing, the applicant demonstrated the existence of several (aid) claims. From the documents submitted by the applicant, it appears that several persons have claims on the vested party that see the payment of Bitcoin or on claims for non-fulfillment of obligations under an agreement, with penalties attached in some cases. At the hearing, therefore, it appeared briefly that the applicant had a right of action, as well as facts and circumstances, which show that the applicant is in the position of having ceased to pay.”
This ruling could mark a very important milestone for the cryptocurrency world, since any claims from now on that issue the transfer of the digital currency under existing civil property rights could be deemed valid and legitimate.
The View of the European Court of Justice
Nevertheless, the Court of Justice of the EU filed a judgment on 22 October of 2015 that presented a different point of view regarding the assumption of bitcoin as a “property of wealth” vehicle.
In Case-264/14, the Court of Justice of the EU ruled the following:
“It must be held, first, that the ‘bitcoin’ virtual currency with bidirectional flow, which will be exchanged for traditional currencies in the context of exchange transactions, cannot be characterised as ‘tangible property’ within the meaning of Article 14 of the VAT Directive, given that, as the Advocate General has observed in point 17 of her Opinion, that virtual currency has no purpose other than to be a means of payment. […] It is common ground that the ‘bitcoin’ virtual currency is neither a security conferring a property right nor a security of a comparable nature.”
The crux of the question, after analyzing both judgments, is whether governments all across the globe will be willing to accept the legal nature of Bitcoin or other digital assets to be equivalent to property rights in contractual agreements. Assuming that the answer is yes, the entire civil legal framework will surely experience some turmoil over the next several years.