Key Takeaways
- A Shanghai court ruled that owning digital assets, such as cryptocurrencies, is not illegal under Chinese law.
- Chinese law classifies digital assets as virtual commodities with property qualities, but it restricts companies from engaging in token issuance or investments.
- The court cautioned that investors may not have legal protection if they suffer financial losses due to speculative trading.
According to a Shanghai judge, individual ownership of digital assets is not unlawful under Chinese law. However, companies are forbidden from investing in digital assets or producing tokens “at will,” according to the judgment.
As per Sun Jie, a judge at Shanghai’s Songjiang People’s Court, it is not illegal for individuals to hold cryptocurrency, as she argued on the court’s official WeChat account. However, the judgment states that firms cannot create tokens or invest in digital assets at will.
Jie went on to say that in Chinese law, digital assets are treated as virtual commodities with property qualities. However, the legislation prohibits corporations from investing in digital assets since they may disrupt the country’s economy or provide an outlet for financial crime.
“Virtual currency trading speculation activities such as BTC 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,” according to Judge Sie.
“That is why laws and regulations always maintain a high-pressure crackdown on speculative activities in cryptocurrency trading.”
While it is not unlawful to own digital assets, the court cautioned the public against ‘crypto,’ warning investors that the law may not be able to protect them in certain situations if they lose their money.
The decision came in a case involving two corporations litigating over a breach of contract in a token issuing deal. Because the law deems token issuing unlawful, the judge ordered that any payments made between the two parties be reimbursed.
Final Thoughts
It’s the latest development in China’s complex relationship with digital assets. On the surface, the Chinese government has prohibited digital assets since 2017, when it closed local exchanges and blacklisted initial coin offerings (ICOs), which were extremely popular throughout the world at the time. It followed up with a ban on block reward mining, forcing miners to move or close down.
However, statistics from Crypto Quant in September indicated that Chinese mining pools held 55% of the BTC mining hashrate, surpassing the second-placed United States at 40%.
Chinese courts have also issued over a dozen decisions implying that possessing digital assets was not unlawful. In one such incident, a court in the southern city of Xiamen ruled that digital assets are protected by the Chinese law since they are considered property.
According to the ruling, the Chinese government allows individuals to own digital assets while enforcing strict regulations to prevent financial instability. This may encourage private investment in digital assets, but it does not address the regulatory issues that impede overall industrial growth.
