Clifford Chance

In a landmark decision dated 26 February 2020, the Commercial Court of Nanterre considers Bitcoin as a fungible and consumable asset in the same way as fiat money, and qualifies the loan of Bitcoins as a loan of fungible assets (prêt de consommation).

Fungible assets means any assets, other than money, that are interchangeable for commercial purposes and the properties of which are essentially identical. 

This first instance judgement proposes a first legal characterisation of the loan of Bitcoins under French law which had been left outside the new regulatory framework for digital assets in France introduced by the loi Pacte.

This decision follows a dispute between the French digital assets exchange platform Paymium and the UK financial advisory firm BitSpread. In 2014, BitSpread opened an account on Paymium, obtaining a loan of 1,000 Bitcoins (BTC) from the French platform. On 1 August 2017, Bitcoin was subject to a "hard fork" splitting which created a new cryptocurrency in addition and in parallel to BTC: the Bitcoin Cash (BCC). At the time of this "hard fork", the companies holding BTCs (including BitSpread) received an equal number of BCCs. In October 2017, BitSpread returned the 1,000 BTCs to Paymium without interest, while Paymium required BitSpread to return the BCCs issued from the "hard fork" in addition to the BTCs. The main issue at stake in the decision was the return of the BCCs to the lender.

On the one hand, Paymium alleges that BitSpread automatically received BCCs for BTCs it held in its account on the Kraken cryptocurrency exchange platform on the day of the "fork", thanks to BTCs lent by Paymium credited on such account. Accordingly, any proceeds obtained thanks to such loan must be returned to the lender, i.e. Paymium. On the other hand, BitSpread maintains that the allocation of new cryptocurrency from the "fork" is not automatic but results from the choice of the platform concerned, which is free to allocate them or not to its clients according to its ability to process the new cryptocurrency and that the BCCs received by BitSpread were not related to the BTC loans made by Paymium. Therefore, BitSpread was entitled to keep the BCCs.

The Commercial Court of Nanterre rejected Paymium's request to receive the 1,000 BCCs considering that BTCs being fungible and consumable, the 3 BTC loan agreements signed by the parties must be characterised as a loan of fungible assets (prêt de consommation) under French law.  According to the judges of the Commercial Court of Nanterre:

"BTC is "consumed" when used, whether to pay for goods or services, to exchange it for currency or to lend it, just like legal tender, even if it is not legal tender; BTC is deemed to be consumable by virtue of its use; […] BTCs are fungible because they are of "the same kind and quality" in that they are all based on the same computer protocol and are subject to an equivalence report with the other BTCs to make a payment within the meaning of the former article 1291 of the civil code, which became article 1347-1 of the same code […]; as BTC is fungible and consumable, the legal qualification of the 3 BTC loan agreements signed between the parties on 1 September 2014, 11 January 2016 and 23 June 2016 is therefore that of a loan of fungible assets [prêt de consommation]" (unofficial translation).

Since there is a transfer of property and risks of the goods to the benefit of the borrower under a loan of fungible assets (prêt de consommation), the Commercial Court of Nanterre considered that any proceeds obtained by BitSpread as the result of the BTCs loan belong to the borrower. Therefore, the Court held that BitSpread can keep the BCCs attributed following the August 2017 "fork".

Sophie Péligry contributed to the writing of this article