China Crypto News: Shanghai Judge Declares Crypto Legal to Hold

China Crypto News: Shanghai Court Issues Landmark Crypto Verdict

In a recent commentary, Judge Sun Jie of the People’s Court of Songjiang District in Shanghai affirmed that cryptocurrency holds the status of a virtual commodity with property attributes. The opinion, shared on the court's WeChat account, stems from a 2017 business dispute but provides clarity on the murky legal status of cryptocurrency ownership in China. According to Judge Sun, while cryptocurrencies lack the status of fiat money, owning them is not illegal for individuals.

The 2017 Blockchain Incubation Dispute

The case in question involved an agricultural development company and an investment management company. The two parties entered into a “Blockchain Incubation Agreement,” where the agricultural firm paid 300,000 yuan (approximately $44,400) to create a white paper for a cryptocurrency project. However, the token was never issued, with the investment firm claiming that an app needed to be developed first. Dissatisfied, the agricultural company sued to recover its payment.

The court ruled that both parties were at fault due to the agreement’s intention to engage in activities deemed illegal under Chinese law. The investment company was ordered to refund 250,000 yuan to the agricultural company.

Regulation Over Cryptocurrency Ownership and Activities

Judge Sun emphasized that although individuals can legally hold cryptocurrencies, commercial entities face restrictions. Businesses are barred from issuing tokens or engaging in cryptocurrency investment transactions. The commentary serves as a reminder that, despite ownership being allowed, commercial exploitation of virtual currencies remains tightly controlled in China.

Risks and Legal Protections in Cryptocurrency Speculation

In her analysis, Judge Sun issued warnings about the dangers of cryptocurrency trading, including its potential to disrupt financial stability and facilitate illegal activities like money laundering, fraud, and pyramid schemes. She highlighted the lack of robust legal protection for individuals and enterprises engaging in cryptocurrency transactions. The discussion also referenced Article 153 of the Civil Code, reinforcing the legal framework governing such cases.

A Complex Landscape for Cryptocurrency in China

China’s crackdown on cryptocurrency exchanges since 2017 and subsequent tightening of regulations in 2021 reflect its cautious approach. While ownership remains legal, the government continues to curb speculative trading and commercial activities to mitigate associated risks. This nuanced stance underscores the delicate balance China maintains between allowing personal ownership and restricting broader usage of virtual currencies.