Court appeal divides Dutch bitcoin community

By March 1, 2015Bitcoin Business
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Court appeal divides Dutch bitcoin community

The atmosphere is heating up in the Netherlands, as a court appeal has created a divide in the Dutch bitcoin community. At stake: the legal status of bitcoin.

The Dutch bitcoin community is in a state of disarray. Over the past couple of months, two of the three board members of the Dutch Bitcoin Foundation have stepped down as an indirect result of communal discord. Simultaneously, one of the biggest bitcoin related companies operating in the area has antagonized a significant portion of Dutch bitcoin users. Some believe the very future of cryptographic currencies in this European bitcoin hub might be determined by a court appeal in the next couple of months, and the desired outcome has split Dutch bitcoiners into two camps.        

The Court Case

At the heart of this story is a court case which deals with events that occurred almost three years ago. In August of 2012, a user bought 2,750 bitcoins worth €8.05 each for a grand total of €22,137.50 from another user – both of whose identities are not known. The buyer paid up his part of the deal soon after this deal was agreed upon. The seller, however, did not send all 2,750 bitcoins, but instead transferred only 990 of them.

After having urged the seller to transfer the rest of the funds several times in the weeks that followed, this proved to be to no avail: the remaining 1,760 bitcoins were never sent. The buyer therefore disbanded the remainder of the deal two months later, in October of 2012. He then asked the seller to reimburse him with the rest of the money that he had paid him instead, which added up to €14,168. But once again, the seller ignored all attempts to close the deal.

As a result, the buyer saw no other option than to take the case to court. The seller was summoned almost a year after the original trade should have taken place, in June of 2013. But by now, of course, the bitcoin exchange rate had skyrocketed to almost €70, a rise of more than 800%. Consequently – and this is the core of the controversy – the buyer did not only demand to be paid back the €14,168 that was defrauded from him, but also wanted the profit he would have made if he had gotten all of the bitcoins within a reasonable time. On top of the original €14,168, he asked for an additional compensation of a whopping €132,792.

As it turns out, the legitimacy of the claim might in part depend on the legal status of bitcoin. According to civil law in the Netherlands, if the seller is indebted to the buyer in something that is regarded as money, then the seller will have to cough up the exact amount of money in whichever currency the debt is stated. So if bitcoin is money legally regarded as a currency, as the buyer claims, he has a right to 1,760 bitcoins, or the equivalent in euros (€132,792 currently).

The judge however, disagreed. Not only was the debt not stated in bitcoin anymore, as the deal was officially canceled in October of 2012, but — more importantly for this story — he also decided that bitcoin is not money under Dutch civil law. The judge did, however, rule that the rise in exchange rate up until the official cancellation of the deal in October of 2012 should be included in the reimbursement. This was one euro per bitcoin, hence adding €1,760 to the original amount of €14,168 for a total of €15,928. The claim to an additional €132,792 was denied.

The Appeal

When the news of the court case first broke, the majority of the Dutch bitcoin community didn't make a big fuss of it. Apart from a couple of articles in – mainly tech and bitcoin related media outlets, the trial as well as the verdict didn't seem to have had much of an impact one way or the other, at least on the surface.

But this changed in September of 2014. On September 3, at the monthly Bitcoin Wednesday meetup in Amsterdam, the Dutch bitcoin brokerage Bitonic supported by the buyer, his law firm Solv, and the Dutch Bitcoin Foundation (which included Bitonic CEO Jouke Hofman as one of three board members) announced a plan to appeal the verdict. They wanted to take the case to a higher court in order to prove for once and for all that bitcoin is in fact money, and should be regarded as such under civil law.

Bitonic CEO Jouke HofmanBitonic CEO Jouke Hofman

In a statement, Hofman said:

“We believe that the decision is based on an incorrect interpretation of the law. Because of this, we feel that the resulting classification of bitcoin may not last. We experience the resulting uncertainty as a restraining force not only in the progress of our business, but also in our contacts with, for example, customers, business partners and governments. Furthermore, as a secondary reason, we feel that bitcoin can benefit from a classification as money.”

In order to take the case to a higher court, money was needed to cover Solv's expenses, as well as the appeal itself. Therefore, Bitonic launched the “Bitcoin is Money” (“Bitcoin is Geld”) initiative and corresponding website, which included a crowdfunding campaign. €5,000 was paid up front by Bitonic themselves, while they hoped to collect another €10,000 from the Dutch bitcoin community. With the help from two major partners, mining specialist BudAds and Lighthouse funder Olivier Janssens, and dozens of individual contributions, the goal was reached within a week.

The Discord

Not everyone was happy about the initiative, however. Even during the very first public announcement of the “Bitcoin is Money” project at the Bitcoin Wednesday meetup, some of the attendees vocally objected to the plan, which was met with an expressive round of applause from a segment of the audience. And during the month that followed, these objections grew wider and louder with the emergence of a series of debates on message boards, podcasts, op-eds, and at meetups.

Many of the critics oppose the bitcoin is money initiative because – quite frankly – they like the fact that bitcoin is not regarded as money. More specifically, many like the fact that the Dutch bitcoin ecosystem is relatively unregulated; they believe that this is the best way to provide for a business friendly climate that is welcoming to companies, and fit for innovation. If bitcoin would be regarded as money under civil law, they fear this could go hand in hand with an increase in regulations, and a higher barrier of entry for bitcoin related businesses.

Some even go so far as to claim that this is an important reason why Bitonic wants bitcoin regulated as money in the first place. As one of the biggest – if not the biggest – bitcoin related businesses in the country, Bitonic has been working to establish a regulated bitcoin exchange in the Netherlands for over a year. As a unique selling point, Bitonic wants this exchange to be fully licensed to hold customers' money. Bitonic has therefore submitted a request for a payment service provider license at the Dutch central bank – but has been waiting for approval ever since. If bitcoin gets to be regulated as money in the Netherlands, these critics say, Bitonic might not only have their application approved more easily, but the high level of entry could shut the door for their competition at the same time.

As a critical part of the Dutch bitcoin community grew increasingly angry, many targeted their dismay at Bitonic, the initiators of the appeal. Others aimed their chagrin towards Hofman specifically, because of his double role as both Bitonic CEO and board member of the Dutch Bitcoin Foundation. Others were displeased with the Dutch Bitcoin Foundation itself, since their involvement suggested that the higher appeal was filed on behalf of the Dutch bitcoin community as a whole – which it was clearly not.

Bitcoin Wednesday Amsterdam meetupBitcoin Wednesday Amsterdam meetup

The Split

Two weeks after the launch of the initiative, the split in the Dutch bitcoin community became apparent. First, Hofman admitted he felt a conflict of interest by serving on the Dutch Bitcoin Foundation's board, and submitted his resignation. As another two weeks passed, he was followed by another board member in favor of the 'bitcoin is money' initiative, Carl Kuntze, although Kuntze did not formally acknowledge whether the 'bitcoin is money' initiative itself had anything to do with his decision.

As such, the only board member who was opposed to the ‘bitcoin is money’ initiative, Bitcoin Wednesday organizer Richard Kohl, remained on the board. He was quickly joined by Alwin de Romijn and Robbie Hontelé, who were both strongly opposed to the initiative as well. As such, the Dutch Bitcoin Foundation has now officially disavowed any association with the initiative via a blog post on the website of Bitcoin Wednesday, stating: “Bitcoin is much more than money. The financial applications of decentralized Blockchain technology are only the tip of the iceberg.”

Bitonic, however, will push forward with its efforts, and has officially submitted the appeal several weeks ago. Hofman said that while “satisfying everyone is our aim, but we are aware of the fact that this is not always possible.”

As an active member of the Dutch Bitcoin community, the author has helped organize some of the Bitcoin Wednesday meetups in the past, and had a referral program with Bitonic on his Dutch Bitcoin news site Coincourant, although this never earned him more than a couple of bucks. He has also organized a debate on the 'bitcoin is money' initiative, and is an outspoken critic of the initiative himself.

Note: The author reached out to the Dutch Bitcoin Foundation for an additional comment. While he did receive an answer, this answer was too long to publish as a quote in this story, and the foundation did not agree with the attempt the author made to edit or rephrase the answer, nor was the foundation willing or able to provide a significantly shorter answer.

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The Dutch bitcoin community is in a state of disarray. Over the past couple of months, two of the three board members of the Dutch Bitcoin Foundation have stepped down as an indirect result of communal discord. Simultaneously, one of the […]

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