In a decision rendered in August 2019 on a Bitcoin loan dispute, the Tainan Branch of Taiwan High Court addressed the issue of how to enforce a judgment under which a Bitcoin borrower “shall pay the plaintiff (the lender) 5.83475753 Bitcoins.” Huang v. Huang, 108 Kang 123, TBC of Taiwan High Court (August 2019). Can the lender motion to seize and auction the borrower’s general assets in order to get an equivalent monetary payment? A positive answer would mean that Bitcoins are treated in the world of law as an asset with good liquidity.
Under Taiwan’s Compulsory Enforcement Act, a judgment holding is to be enforced in a manner in accordance with the nature of the holding. While the seize-and-sell procedure can be applied to a currency-based holding (e.g. “the defendant shall pay the plaintiff NT$5 million”), it is not allowed to (directly) apply to other types of holdings, say a holding under which the defendant should deliver a portrait or a house. So, what is the nature of virtual currency? Shall we deem it to be a currency, a thing (or, in legal term, an object of a right in rem), an intangible property (like a copyright), a bond, or a legal claim? The candidates ever discussed run almost the entire gamut of lawyer’s categorization of property.
The Court’s answer was that Bitcoin should be deemed as a “fungible thing,” the traditional examples of which include gold and grain. The judges’ rationales are:
|As Taiwan’s Central Bank announced, Bitcoin is not a transaction medium generally accepted by the public and its value is unstable; it can hardly serve as a unit of account nor a store of value and hence lacks the characteristics of a real currency; it is not issued as a legal tender any monetary authority of any country, nor supported by any reserve and redemption guarantee; the holder therefore bears the risk of being unable to pay with or circulate Bitcoins. For the above reasons, … Bitcoin should not be considered as a currency in our country. (The writer’s note: this paragraph is actually a quotation from a new release issued by Taiwan’s Central Bank on December 30, 2013)
As Bitcoin still represents a value and can be exchanged for things or currencies with equivalent value, it is an object in which a right is attached. Therefore, it should be deemed to be a “thing,” or, to be more precise, a fungible thing. As such, the delivery of a Bitcoin should be enforced in accordance with the rules as applied for a fungible thing.
If the debtor is in possession of the fungible thing, then the enforcement court should [upon the creditor’s motion divest the debtor’s possession and] hand it over to the creditor. Otherwise, the debtor should purchase the fungible thing of the same amount as indicated in the court holding and deliver the same to the creditor. In case of the debtor’s non-compliance, the enforcement court shall [upon the creditor’s motion] issue a new order to request the debtor pay the creditor a sum equivalent to the price of the fungible thing. Only if the debtor still fails to do so, can the creditor motion to seize the debtor’s general assets by the authority of the new order.
It can be imagined that other virtual currencies will likewise be accorded the “fungible thing” status with limited liquidity according to the above court holding which many believe has a good chance to become the majority view of Taiwan’s courts.