As a seasoned investor with a keen interest in the dynamic world of cryptocurrencies, I’ve witnessed firsthand the rollercoaster ride that is this burgeoning market. Having navigated through various regulatory landscapes across continents, I can confidently say that China’s stance on crypto remains a fascinating enigma.
A judge from the Songjiang District People’s Court in Shanghai, China, recently published an article via their WeChat account discussing the validity of digital currency transactions within China. This commentary was related to a business disagreement that originated in 2017, yet it provides insights into the unclear legal standing of cryptocurrencies in China.
A virtual commodity with property attributes
A farming advancement corporation collaborated with a financial investment firm by entering into a “Blockchain Innovation Partnership” agreement. This partnership aimed to create a comprehensive report (white paper) to facilitate the launch of a digital currency. The agricultural company paid approximately $44,400 (equivalent to 300,000 yuan at that time) for this service.
Approximately a year elapsed without any tokens being generated. At this point, the investment firm demanded that the agricultural company create an application prior to the tokens’ release. However, instead of complying, the agricultural company opted to file a lawsuit in order to reclaim the funds they had already disbursed.
In simpler terms, the court determined that the business contract contained actions deemed unlawful by both parties. As a result, they decided the financial company should refund 250,000 Chinese Yuan.
In simpler terms, Judge Sun Jie explained that digital currencies do not hold the same status as physical money (fiat currency), instead, they possess characteristics similar to tangible goods or property.
“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.”
How banned is crypto in China?
The judge continued by issuing a detailed caution concerning the possible drawbacks associated with using cryptocurrencies.
“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.”
As a researcher examining virtual currency transactions, I’ve come to understand that engaging in such activities without explicit legal safeguards might leave both individuals and businesses potentially vulnerable. This insight stems from a court judgment which highlights the absence of comprehensive legal protection for those who participate in these transactions ‘blindly’. To shed more light on this issue, I’m referring to Article 153 of the Civil Code of the People’s Republic of China, as it provides the essential legal framework relevant to this case.
2017 saw China mandating the shutdown of digital currency trading platforms. Later in 2021, China’s People’s Bank and 10 other government agencies collaborated to strengthen supervision over digital currency transactions. However, it’s important to note that owning cryptocurrencies was never outlawed in China.
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2024-11-21 00:36