The Shanghai Hongkou District Court ruled that Ethereum and other cryptocurrencies are not classified as money but have the same legal protection as owning property, a post on Baidu, the Chinese internet search engine portal similar to Google, said.
The case stemmed from the fundraising done by a Beijing-based technology company in August 2017 involving Bitcoin and Ethereum. However, the company was forced to return the company to investors after the Chinese government ordered a ban on initial coin offerings.
However, because of an operational error, the company sent 20 Ethereum to the wrong investor. The technology firm tried to recover the ETH from the wrong recipient, but the investor cut all communication and refused to return the digital currency. The company then took the matter to court and filed charges against the investor.
The court ruling stated:
“The court holds that because the others had no legal basis and obtained improper benefits, the person who suffered the loss had the right to request the return of the improper benefits.”
At first, the court ruled in favor of the company and stated its appeal was justified, and the investor should immediately return the money. But the investor appealed the decision, pointing out the government's ban on ICOs and cryptocurrency trading which, he said, nullified the charges.
However, the court stuck with its decision and said that while digital currencies may not be treated as fiat currency, they have the same protection under property rights.
“China does not recognize the monetary properties of ‘virtual currencies’ including Ether. However, we cannot deny the fact that Ether should be protected by law as a general property… According to this rule, after the party mistakenly transfers the virtual currency, the recipient of the virtual currency can be requested to return the property. If the unjustified party refuses to return, the injured party can sue in court.”
In the end, the investor returned all 20 Ethereum within ten days after the judgment.
Even with this favorable ruling, a recent study by a professor at the Shanghai Jiaotong University shows that a majority of the Chinese middle class are unlikely to invest in digital assets. Wu Xiaobo, who is also a financial writer, released his 2018 White Paper on the New Middle Class showing that less than 10% of the new middle class in China is investing in digital currencies.