Crypto Is A Legal Commodity According To Shanghai Judge

A judge in the Songjiang District in Shanghai, China, recently published an article discussing the legality of issuing virtual currency in the country. Her comments were made in the context of a business dispute dating back to 2017, but they also provide insight into the unclear legal standing of cryptocurrency in China.

Defining Ownership Characteristics

An agricultural development firm entered into a Blockchain Incubation Agreement with an investment management company to create a white paper that would serve as the basis for issuing a cryptocurrency, paying 300,000 Yuan (roughly $44,400 at the time) for the service.

However, a year later, the promised token had not been created, and the investment firm argued that the agricultural company needed to develop an app before the token could be issued. The agricultural firm responded by suing for a refund of the money it had already paid.

The court ruled that the agreement between the two companies involved illegal actions, with both parties at fault. It ordered the investment firm to repay 250,000 Yuan. Judge Sun Jie noted that while virtual currency does not qualify as fiat money, it should be seen as a virtual asset with ownership characteristics.

Not Illegal To Hold Crypto

Judge Jie clarified that although it is not illegal for individuals to simply hold virtual currency, commercial entities are prohibited when it comes to engaging in virtual currency investments or issuing tokens independently.

The judge further warned about the potential dangers associated with crypto, stating that activities like cryptocurrency trading could disrupt the financial system and become a means for illegal activities such as money laundering, fraud, illegal fundraising, and pyramid schemes. She advised that individuals and businesses involved in virtual currency transactions might not have full legal protection.

The article also referenced Article 153 of the Civil Code, which pertains to the case. Although China has banned cryptocurrency exchanges since 2017 and intensified regulatory measures in 2021 through several government agencies, ownership of cryptocurrency has never been outright prohibited.