Bitcoin does not qualify as currency, but as medium of exchange

In the Netherlands, so called Bitcoins do not qualify as ‘currency’ in accordance with the Dutch Civil Code (DCC). According to a Dutch District Court (Overijssel) in a recent ruling, the Bitcoin has the status of a medium of exchange.

In the case at issue, a seller ought to transfer 2750 Bitcoins to a buyer, based on a purchase agreement. However, after payment of the purchase price by the buyer, the seller only transferred 990 Bitcoins. The buyer stated that due to this non-performance, he suffered a loss as a consequence of the rise in the exchange rate of the Bitcoin.

Article 6:125 DCC is the basis for compensation of loss due to exchange rate movements. The buyer stated that a transfer of Bitcoins can be seen as a payment. According to the court, this statement is based on the assumption that the Bitcoin qualifies as ‘currency’ within the meaning of the DCC.
The court holds that this assumption is incorrect, based on the following grounds.

Firstly the Bitcoin is not a common currency in the Netherlands as defined in article 6:112 DCC. Secondly, a transfer of Bitcoins does not constitute a bank-giro payment, since Bitcoins are not managed by a third party but by the user itself. In this context, the court acknowledges that the so called ‘wallet’ –  a digital wallet in which Bitcoins can be stored –  does resemble a bank or giro account. However, the striking difference is that the Bitcoins do not become the assets of the wallet-provider.

Consequently, the buyer is not eligible for compensation of damages due to exchange rate movements. The seller is however obliged to compensate the buyer for the superfluous amount paid plus interest.

This ruling once again shows that under Dutch law the status of Bitcoins is undefined and the user of Bitcoins enjoys little protection. Last year, the Dutch Minister of Finance indicated that Bitcoins do not qualify as electronic money within the meaning of the Dutch Financial Supervision Act (FSA) because the Bitcoin does not meet the legal requirements for that purpose. The Dutch Central Bank has also warned that Bitcoins fall outside the scope of the FSA and that Bitcoin credit balances are not protected by the Dutch deposit guarantee scheme

Compliments of EACCNY Member Houthoff Buruma

Questions: Contact: Siemers, Bastiaan | Counsel |+31206056976 |  b.siemers[at]houthoff.com