Shanghai Judge Sun Jie calls virtual currency a commodity with property attributes in a commentary on a 2017 business dispute.
A judge in the People’s Court of Songjiang District in Shanghai, China, has released an article on the court’s WeChat account about the legality of issuing virtual currency in China. She was commenting on a business dispute dating to 2017, but her opinion sheds light on cryptocurrency’s murky legal status in China.
A virtual commodity with property attributes
An agricultural development company signed a “Blockchain Incubation Agreement” with an investment management company to produce a white paper as the basis for the issuance of a cryptocurrency, paying 300,000 yuan (about $44,400 at the time) for the service.
A year later, no token had been produced, and the investment company said the agricultural company should develop an app before the token could be issued. Instead, the agricultural company sued to recover the money it had paid.
The court ruled that the agreement between the companies envisioned illegal activities, for which both sides were at fault. It ordered the investment company to return 250,000 yuan.
Related: Is Trump right to worry that China could ‘take over’ crypto?
Judge Sun Jie wrote that virtual currency does not have the status of fiat currency but is rather a virtual commodity with “property attributes.” She stated:
“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 went on to give a lengthy warning about the potential ills of cryptocurrency. For example:
“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.”
By “blindly participating in virtual currency transactions,” individuals and enterprises may not have the full protection of the law, the judge concluded. The article reproduces Article 153 of the Civil Code of the People’s Republic of China, as it is the relevant legislation to the case.
China ordered virtual currency exchanges to close down in 2017. In 2021, the People’s Bank of China and 10 Chinese government agencies joined forces to tighten control over transactions with virtual currencies. Nonetheless, ownership of crypto was never prohibited.
