The legal status of cryptocurrency in China has long been a subject of global interest and confusion. A recent article published on November 18, 2024, by the Shanghai Higher People’s Court titled "What Lies at the End of Raising Large Sums via Virtual Currency?" sparked renewed debate within the crypto community. In the piece, a judge from Songjiang District People’s Court stated: “Simply holding virtual currency as an individual is not illegal.” This comment quickly went viral, with some interpreting it as a sign of regulatory softening. But is this really the case?
This article provides a clear, structured analysis of China’s legal stance on cryptocurrency by examining official policies, judicial precedents, and court rulings. We’ll explore whether crypto is recognized as property, the enforceability of crypto-related contracts, and the legal remedies available to investors—offering a reliable guide for anyone navigating this complex landscape.
Understanding Cryptocurrency Under Chinese Law
Cryptocurrency refers to digital or virtual currencies secured by cryptography and typically built on decentralized blockchain technology. Unlike fiat money issued by central banks, cryptocurrencies operate without centralized oversight. While they offer innovation and financial inclusion, they also pose risks related to fraud, speculation, and regulatory evasion.
China has consistently supported blockchain innovation while maintaining strict controls over cryptocurrency use. Over the past decade, several key regulatory documents have shaped how courts and authorities treat crypto assets.
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Key Regulatory Milestones
2013 Notice: Bitcoin as a Virtual Commodity
The People’s Bank of China (PBOC) and five other agencies issued a notice stating that Bitcoin is a virtual commodity, not legal tender. Financial institutions were prohibited from:
- Pricing goods or services in Bitcoin
- Buying or selling Bitcoin
- Providing Bitcoin registration, trading, custody, or settlement services
This established an early boundary: while individuals could hold Bitcoin, institutional involvement was off-limits.
2017 Announcement: Ban on ICOs
In response to the surge in Initial Coin Offerings (ICOs), seven Chinese agencies jointly declared ICOs illegal fundraising activities. Key prohibitions included:
- Conducting token-based financing
- Operating exchanges that facilitate fiat-crypto conversions
- Acting as intermediaries or price setters for tokens
This marked a decisive move against crypto fundraising mechanisms.
2021 Notice: Broad Crackdown on Crypto Activities
A more comprehensive directive from ten agencies—including the Supreme People’s Court and Supreme People’s Procuratorate—declared that “virtual currency-related business activities are illegal financial activities.” It emphasized:
“Civil acts involving investment in virtual currencies that violate public order and good customs are invalid. Losses incurred are borne by the participants themselves.”
This notice carries significant weight in court decisions due to the involvement of top judicial bodies.
Is Cryptocurrency Legally Recognized in China?
Despite the restrictive regulatory environment, Chinese courts have consistently recognized cryptocurrency as virtual property with economic value.
In the (2018) Jing 01 Min Zhong 9579 case, Beijing’s First Intermediate People’s Court affirmed that “anyone can legally hold virtual commodities like Bitcoin.”
Similarly, in (2019) Hu 01 Min Zhong 13689, the Shanghai court analyzed Bitcoin’s creation through mining—requiring hardware investment, electricity costs, and computational labor—and concluded it meets the criteria of value, scarcity, and transferability, thus qualifying as virtual property.
Even after the 2021 notice, courts have maintained this view. In (2022) Jing 01 Min Zhong 5972, the court clarified that while certain crypto transactions may be invalid, the asset itself remains protectable under property law principles.
This distinction is crucial: holding crypto ≠ engaging in regulated financial activity.
Are Crypto Transactions Enforceable in Chinese Courts?
While ownership may be acknowledged, the enforceability of crypto transactions tells a different story—one that has evolved significantly since 2021.
Pre-2021: Limited Recognition of Transaction Validity
Before stricter rules took effect, some courts upheld crypto-related agreements.
- In (2020) E Yue 0102 Min Chu 1574 (Wuhan), a Bitcoin lending agreement was deemed valid because no law explicitly banned such transactions.
- In (2020) Jing Min Zhong 747, Beijing’s High Court recognized a verbal contract for Tripio coin trading, distinguishing it from illegal ICOs.
These rulings reflected a cautious but functional approach to private crypto dealings.
Post-2021: Growing Refusals to Hear Cases
After the 2021 notice, courts increasingly refuse to hear crypto disputes altogether.
Examples include:
- (2021) Changzhou Case: A claim for Bitcoin repayment was dismissed for falling outside civil litigation scope.
- (2022) Zhe 10 Min Zhong 352 (Taizhou): The court ruled Bitcoin lacks a legal valuation standard; losses are self-assumed.
- (2024) Yu 13 Min Zhong 3746 (Nanyang): FIL token rewards were deemed unregulated virtual items beyond legal evaluation.
Courts now frequently cite “lack of jurisdiction” or “violation of public order” to avoid adjudicating these cases.
When Courts Do Rule: Contracts Often Declared Invalid
In rare instances where courts proceed to judgment, they often invalidate the transaction.
Two common outcomes emerge:
Restitution Ordered
- (2021) Hu 0114 Min Chu 22216: A Bitcoin management agreement was voided due to violating public order; defendant ordered to return BTC.
- (2022) Hu 01 Min Zhong 8069: Appellate court upheld return of virtual currency acquired under invalid transfer.
Losses Borne by Investor
- (2022) Jing 01 Min Zhong 8645: Sigma coin purchase contract invalidated; buyer must bear loss.
- (2023) Jing Min Shen 463: A crypto-based asset management agreement was voided for disrupting financial order. Despite contractual obligations, plaintiff’s claim for recovery was denied—since crypto rights aren’t protected when used like money.
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Notably, in (2018) Yue 03 Min Te 719, Shenzhen Intermediate Court overturned an arbitration award requiring BTC-to-CNY compensation, calling it “a disguised fiat-crypto exchange” violating public interest. The Supreme Court later adopted this as Guiding Case No. 199, signaling national judicial alignment.
Frequently Asked Questions (FAQ)
Q: Can I legally own cryptocurrency in China?
A: Yes. Courts recognize crypto as virtual property with economic value. Simply holding it does not violate Chinese law.
Q: Is buying or selling cryptocurrency illegal?
A: While personal possession is tolerated, trading platforms and exchanges are banned, and financial institutions cannot facilitate transactions. Private peer-to-peer trades exist in a gray area but offer no legal protection.
Q: Can I sue someone who owes me Bitcoin?
A: It’s unlikely. Most courts now dismiss such cases for lacking jurisdiction or violating public policy. Even if you win on principle, enforcement is nearly impossible.
Q: What happens if my crypto is stolen or lost?
A: You have no legal recourse. Courts generally consider such risks self-assumed under current policy frameworks.
Q: Does China ban blockchain technology?
A: No. The government supports blockchain development for supply chain, finance, and data management—but strictly separates it from cryptocurrency applications.
Q: Could China’s stance change in the future?
A: Possible, but unlikely soon. With the digital yuan (e-CNY) as its official digital currency, China has little incentive to legitimize decentralized alternatives.
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Conclusion
China maintains a nuanced but firm position on cryptocurrency:
- ✅ Holding crypto is not illegal — courts recognize it as virtual property.
- ❌ Crypto transactions lack legal protection — contracts are often voided or dismissed.
- ⚠️ Investors bear full risk — no judicial remedies exist for losses.
For investors, this means that while digital assets may exist in your wallet, they largely exist outside the protection of the law. Always consult legal counsel before entering any crypto-related agreement in mainland China.
As global regulations evolve, understanding local legal realities remains essential—not just for compliance, but for protecting your digital wealth.
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