Judge Sun Jie of the People’s Court of Songjiang District in Shanghai has provided clarity on cryptocurrency’s legal status in China, describing it as a virtual commodity with property attributes. Her statement, shared through the court’s WeChat account, reflects on a 2017 business dispute but also sheds light on broader regulatory attitudes toward crypto in the country.
Cryptocurrency: A Virtual Commodity, Not Fiat Currency
Judge Sun stated that while individual ownership of cryptocurrency is not illegal, its use by businesses is heavily restricted. According to her:
- Cryptocurrency lacks the status of legal tender in China.
- It qualifies as a virtual commodity, meaning individuals can legally hold it as property.
- Businesses, however, cannot engage in issuing tokens or trading cryptocurrencies.
Her comments highlight the distinction between private ownership and commercial activities involving digital assets, underscoring the government’s strict stance on crypto-related business operations.
Details of the 2017 Dispute
The judge’s commentary stemmed from a case in which an agricultural development company entered a “Blockchain Incubation Agreement” with an investment firm.
- The company paid 300,000 yuan (approximately $44,400) to create a white paper for a planned cryptocurrency.
- After a year with no token produced, the investment firm claimed the agricultural company needed to develop an app before proceeding.
- The agricultural company sued to recover its payment, and the court found both parties at fault for engaging in a potentially illegal agreement. The investment firm was ordered to return 250,000 yuan.
Judge Sun emphasized that agreements involving virtual currency issuance or trading are not legally enforceable due to their commercial nature.
Warnings About Crypto Speculation
In her analysis, Judge Sun also issued a strong caution against cryptocurrency speculation. She explained that activities like Bitcoin trading could:
- Disrupt economic and financial stability.
- Serve as tools for illegal activities such as money laundering, fraud, and pyramid schemes.
The judge noted that individuals and businesses involved in virtual currency transactions might not receive full legal protection under Chinese law.
Evolving Crypto Regulations in China
China banned cryptocurrency exchanges in 2017 and intensified its crackdown in 2021 when the People’s Bank of China and other agencies restricted virtual currency transactions. However, crypto ownership remains legal, with regulatory efforts focused on curbing speculative and commercial activities.
Judge Sun’s comments reiterate the government’s cautious approach, reinforcing that while individuals may hold cryptocurrencies, enterprises face strict limitations.
