Bitcoin Is Not Money – South Korean Court Declares
In a recent ruling, the Seoul High Court’s Civil Division in South Korea declared that Bitcoin (BTC) should not be classified as money. As a result, interest rate regulations do not apply to business transactions involving this or any other crypto asset.
A local media outlet, Hanguk Kyungjae, reported that the latest ruling occurred following a case involving two anonymous firms whose identities were protected for legal purposes.
No Interest Rate For Crypto Assets
According to the Seoul court, imposing interest rates for lending BTC is challenging because crypto assets are not recognized as money. Thus, they cannot be subject to the country’s national laws.
The court proceedings revealed that the two firms in question entered into a contract in October 2020 to use Bitcoin for their transactions. According to the court filing, Company B agreed with Company A (a fintech company dealing in crypto assets) to borrow 30 BTC for three months.
As part of the agreement between the two parties, company B initially agreed to make interest rate payments of 1.5 BTC, equivalent to 5% of the total, for the first two months, 0.75 BTC, equivalent to 2.5% for the final month while the rest is spread as agreed.
Unfortunately, Company B failed to fulfill its repayment obligations for the borrowed Bitcoin, leading to a breach of contract and the ensuing court case. Nevertheless, Company A decided to extend the loan period until April 2021.
Also, it adjusted the interest rate to 0.246 BTC per month, equivalent to an annual interest rate of 10%, to enable Company B to keep up with the payment schedules. Still, Company B continued to default on its repayment obligations.
Will The Ruling Impact Bitcoin?
By recognizing Bitcoin as different from fiat currencies, this ruling could have broader implications on how other jurisdictions treat cryptocurrencies in their legal and regulatory frameworks. Moreover, the court’s decision highlights the evolving nature of digital assets and the need for adaptive legal frameworks to accommodate their unique features.
In its appeal, Company B claimed that Company A breached the country’s interest and loan agreements by adjusting the interest rates more than the legal ones. However, another lower court rejected Company B’s defense by ruling that the legal battle resulted from crypto assets, not fiat currencies.
According to the court, interest restriction and loan business laws do not apply to this case. Not satisfied, Company B took the case to the High Court, which upheld the lower court’s decision by ruling that the firm should pay the BTC tokens per its initial contractual agreement with Company A.
It is worth noting that under South Korean laws, aggrieved parties can appeal legal verdicts twice, which means that Company B can still take the case to the Supreme Court.
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