Overview
Recently, the Haidian District Court in Beijing accepted a lawsuit filed by Mr. Shi, a user of the cryptocurrency exchange platform Coinbay, over the theft of Bitcoin from his account. Mr. Shi is seeking compensation of approximately 410,000 RMB from Coinbay’s operator, Beijing Coinbay Technology Co., Ltd., for alleged negligence in security protocols.
This marks a landmark case in China, as Bitcoin and other digital currencies are increasingly recognized as civil rights objects, reinforcing their legal status under evolving financial regulations.
Case Details
The Incident
Background:
- Mr. Shi began trading Bitcoin in 2015 across multiple platforms, including Coinbay, Yuanbao, and Huobi.
- On May 7, 2016, a hacker redeemed 40+ Bitcoin from his Coinbay account and transferred them via "red packets" to a newly registered account, later withdrawing the funds to a private wallet.
Platform Negligence Claims:
Mr. Shi alleges Coinbay failed to:
- Provide security alerts during suspicious transactions.
- Prevent the hacker from exploiting vulnerabilities to transfer Bitcoin from other platforms (Huobi/Yuanbao) to Coinbay for liquidation.
Total Loss:
- 99.5 Bitcoin (worth ~410,000 RMB) were stolen in total, including transfers from linked accounts.
Legal Arguments
Plaintiff’s Position:
- Coinbay’s service contract obligations were breached due to inadequate security measures.
Defendant’s Response:
Coinbay highlights inconsistencies:
- Simultaneous loss of login and withdrawal passwords across platforms.
- Lack of two-factor authentication (e.g., Google Authenticator) despite high-value holdings.
- Identical credentials used on multiple platforms (per Mr. Shi’s admission).
Broader Implications
Bitcoin’s Legal Status in China
Virtual Property Recognition:
- The Civil Code Draft (June 2016) proposed classifying digital assets (e.g., Bitcoin, game currencies) as protected civil rights objects.
Regulatory Context:
- While China bans cryptocurrency exchanges, individual asset ownership rights are gaining judicial recognition.
Bitcoin Basics
- Definition: Decentralized digital currency with anonymity and global transferability.
Key Features:
- No central authority (e.g., banks/governments).
- Borderless transactions via blockchain technology.
FAQs
Is Bitcoin legally protected in China?
- Yes, under the Civil Code Draft, digital assets are recognized as civil rights objects, though trading remains restricted.
How can users secure cryptocurrency holdings?
- Use unique passwords, enable two-factor authentication, and avoid reusing credentials across platforms.
What was Coinbay’s defense?
- They cited user negligence (e.g., weak security practices) as a contributing factor to the theft.
Can stolen Bitcoin be recovered?
- Due to Bitcoin’s anonymity, recovery is challenging but traceable via blockchain forensics.
👉 Secure your crypto assets with trusted platforms
Conclusion
This case underscores the legal ambiguities and security risks in digital asset management. As cryptocurrencies gain formal recognition, platforms and users must prioritize robust security measures to mitigate theft risks.
Sources: Beijing Morning Post, Bitcoin News Network