How Can Claims in Bitcoin or Other Cryptocurrencies Be Enforced?
What are money debts?
The Swiss Code of Obligations defines money debts as debts which are payable either in Swiss francs or in another country’s currency. In relation to Bitcoin and other cryptocurrencies that are not legal tender, the question arises whether transfers of these currencies constitute a payment within the meaning of the law.
The ICO Guidance issued by FINMA suggests this is the case, at least for so-called payment tokens. Whether a currency qualifies as a cryptocurrency depends upon its economic function. On this basis, tokens are only considered payment tokens if they are actually accepted as payment methods for the acquisition of goods or services, or serve to transfer money and value. According to FINMA this applies, for example, to Bitcoin, Ether or Stablecoins.
In Switzerland, unless otherwise expressly agreed, debts denominated in foreign currencies can also be paid in Swiss francs.
However, if two parties have expressly agreed that the relevant services or goods are payable in Bitcoin or another specified cryptocurrency, the debtor cannot simply settle the claim in Swiss francs.
Can Bitcoin claims be enforced through the debt collection route?
In contrast to other claims, money claims can be enforced through the debt collection route. The process is started with a debt enforcement request. If the claim is not in Swiss francs, it must be converted into francs for the enforcement process.
However, if the parties have explicitly agreed that the claim can only be paid in a specified foreign currency, then enforcement via the debt collection route is not possible.
In legal terms, this then becomes a payment in kind, which can only be enforced through enforcement of a court order (Realvollstreckung). The same applies to claims in Bitcoin or other cryptocurrencies. Conversely, if nothing has been expressly agreed, it should be investigated whether, based on the specific circumstances of the individual case, the claim is actually a money claim and whether it is possible to commence debt collection proceedings.
Although the debt collection process has some advantages for a creditor over enforcement of a court order, the requirement to convert the debt into Swiss francs can cause considerable uncertainty for currencies which are subject to strong exchange rate fluctuations.
Furthermore, it should be checked in each case whether statutory interest of 5% for late payment applies to debts in Bitcoin or other cryptocurrencies, as late payment interest only applies to money debts.
How should any legal uncertainties be managed?
It is important that the parties are aware at the time of concluding the contract that legal uncertainties can arise in relation to claims in foreign or cryptocurrencies. With this in mind, it is recommended that the currency in which a specific claim is owed and can or must be paid is expressly stated.
Subsequently, prior to the commencement of debt collection or court proceedings, it should be checked which claim can or must be brought using which proceedings and in which currency.
As stated above, conversion of the debt into Swiss francs is mandatory in debt collection proceedings. In contrast, a creditor bringing a claim in a foreign or cryptocurrency through normal court proceedings must always bring the claim in the applicable currency. Otherwise, the claim risks being dismissed.