A recent ruling by Judge Sun Jie of the People’s Court of Songjiang District in Shanghai has clarified the legal status of crypto in China, stating that virtual currencies are considered legal commodities with property rights.
The ruling stems from a 2017 business dispute involving a company that failed to issue a token as promised, resulting in a partial refund. Judge Sun confirmed that individuals can legally own virtual currencies, but commercial entities are prohibited from engaging in crypto investments or issuing crypto tokens.
“Although it is not illegal for individuals to simply hold virtual currency, commercial entities cannot participate in virtual currency investment transactions or even issue tokens on their own.”
Judge Sun also highlighted the risks associated with cryptocurrencies, including market speculation, potential disruptions to financial systems, and their misuse in illegal activities like money laundering and fraud.
“Virtual currency trading speculation activities such as Bitcoin will not only disrupt the economic and financial order, but also may become a payment and settlement tool for illegal and criminal activities, breeding money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities.”
Despite China’s stringent regulations on crypto since 2017, which have involved shutting down exchanges and restricting transactions, ownership of digital assets has not been prohibited.
China has taken a strong stance on crypto over the past several years. In 2017, the People’s Bank of China (PBOC) ordered all cryptocurrency exchanges to close, effectively cutting off mainland access to crypto trading platforms. This was part of a broader effort to prevent speculative trading and protect financial stability.
In 2021, the PBOC, along with other Chinese regulatory bodies, escalated its crackdown by further restricting financial institutions from offering services related to cryptocurrency transactions. These measures effectively banned financial institutions from supporting crypto-related activities.
Despite these commercial restrictions, personal ownership of cryptocurrencies has remained legal. However, concerns have been raised by the government about the risks posed by digital assets, including their use in illicit activities and potential financial instability. In addition, there has been ongoing criticism regarding the environmental impact of crypto mining.
The recent ruling comes amid ongoing speculation about China’s future stance on cryptocurrency, as the global landscape around digital assets continues to evolve. While the ruling confirms the legality of individual cryptocurrency ownership, it also reinforces the continued ban on commercial activities involving virtual currencies, such as issuing tokens.
The legal environment surrounding crypto in China remains complex. A recent bribery case involving Yao Qian, the former head of the People’s Bank of China’s digital currency institute, has highlighted some of the contradictions within the regulatory framework.
Experts like Zhu Guangyao, former vice minister of finance, have suggested that China must adapt to remain competitive in the digital economy, given the increasing importance of crypto on the global stage.
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