A ruling made by a Tokyo District Court – and unearthed by the CEO of Japanese crypto exchange bitFlyer – appears to suggest that exchanges are not legally obliged to transfer any cryptoassets generated by hard forks to their customers.
Per a series of tweets from bitFlyer CEO Yuzo Kano, a Tokyo court recently made a ruling on hard forks – which may have legal precedent in cases going forward. Kano tweeted a picture of the legal documentation to back up his claims.
Not all hard forks generate new cryptoassets, but on numerous occasions in the past, radical changes to blockchain network protocols have seen new tokens created. This has caused a legal and moral quandary – with exchanges in Japan and elsewhere unsure of what they are supposed to do when tokens held in wallets on their platforms hard fork, resulting in new token creation.
Kano claimed that, based on the verdict, exchanges are not obliged to provide hard fork-generated coins to customers unless their terms and conditions state otherwise. The exact wording of the T&Cs in such cases is important, as exactly what “give” and “transfer” mean could be open for interpretation in many hard fork-related cases.
Exchanges may choose to convert tokens to fiat if they decide not to list the tokens at their own discretion, the verdict suggests.
Twitter users reacted with caution at the news, with one skeptic suggesting that bitFlyer might use the ruling as justification to withhold new hard fork-generated coins from customers in future cases.
Hard fork-generated tokens have been a thorn in Japanese exchanges’ sides for some time, particularly the bitcoin cash (BCH) hard fork of 2018. SBI’s SBI VC Trade platform delisted BCH in April last year, with its CEO stating,
“Coins that regularly experience hard forks are ludicrous.”
Another Twitter user replied to Kano, and opined that listing hard fork-generated coins was far more trouble than it was worth for most exchanges, as all token listings at exchanges must now be cleared by the nation’s top financial regulator, the Financial Services Agency, and integrated with increasingly sophisticated security and management platforms.