- A Judge in China has confirmed the legality of crypto assets as a commodity.
- China’s Bitcoin and crypto ban remain in place but with a shift in the overall outlook.
The Shanghai High Court confirmed in a recent judgment that cryptocurrencies have property attributes and are not prohibited by law. These protections, however, only apply to crypto as a commodity, not as currency or business instrument.
China’s Tough Crypto Regulation
These comments were made during a fraud case involving two corporations and a failed token launch. As revealed in a new WeChat post, the unnamed agricultural development company plaintiff signed an agreement with the defendant, an investment management firm, for token issuance.
The plaintiff entrusted the defendant with issuing blockchain tokens based on smart contract technologies such as Bitcoin and Ethereum. The agricultural firm paid the defendant service fees totaling RMB 300,000. However, a year later, the investment firm failed to deliver on the token, citing high APP development costs.
The plaintiff’s expectations were crushed, so it filed a lawsuit in the People’s Court. In its filing, the firm requested that the investment management firm terminate the contract and repay the 300,000 yuan service fee.
The court strongly denounced actions from both firms and ruled, “Raising so-called ‘virtual currencies’ such as Bitcoin and Ethereum from investors through illegal issuance and circulation of tokens… is essentially an act of illegal public financing without approval. Therefore, no organization or individual may engage in illegal token issuance and financing activities.”
The Judge added that the agreed service items are illegal financial activities and, therefore, rendered the Blockchain Incubation Agreement involved in the case void. The Court claimed that crypto had value as a commodity and that no prohibitions existed for individuals holding crypto.
However, the Judge highlighted that crypto-related business activities are regarded as illegal financial activities in China. This means commercial entities cannot participate in crypto investment transactions or even issue tokens at will.
Bitcoin Comeback In China?
The international community has remained invested in bringing crypto back to China since the government enforced a Bitcoin mining ban in 2021. Earlier this year, Hong Kong followed in the footsteps of the US, launching its first Bitcoin Exchange-Traded Fund (ETF). According to a report from CNF, Hong Kong Bitcoin ETFs might open the gates for Chinese investors.
China has also promoted crypto and blockchain technologies for cross-border payment solutions at the BRICS Summit. Although Russia spoke more positively about digital assets, China has employed cryptocurrency in Russian trade.
Moreover, Xiao Feng, CEO and Chairman of Hong Kong’s HashKey Group, suggested that a shift in China’s crypto space is increasingly possible. As revealed in a CNF post, the CEO claimed establishing clear crypto legislation in the United States could influence China’s approach.
Furthermore, the government also has a Central Bank Digital Currency (CBDC), the digital yuan, widely utilized in diverse controlled trades. While China has not announced plans to lift the ban on Bitcoin mining, its recent developments show little sign of a broader shift in crypto.
