Legal Status of Digital Assets in China Clarified

Owning digital assets is not illegal under Chinese law for individuals, but restrictions remain for enterprises, a Shanghai judge has affirmed.

Sun Jie, a judge at Shanghai’s Songjiang People’s Court, issued a statement on the court’s official WeChat account, clarifying that individual cryptocurrency ownership is not prohibited by Chinese law. However, she emphasized that enterprises are barred from investing in digital assets or issuing tokens “at will.”

According to Jie, digital assets are recognized as virtual commodities with property attributes under Chinese law. Nevertheless, their use is tightly regulated to prevent economic disruption and mitigate risks of financial crime.

“Virtual currency trading speculation activities such as BTC not only disrupt the economic and financial order but may also become tools for illegal and criminal activities, including money laundering, illegal fundraising, fraud, and pyramid schemes,” stated Judge Jie.

This strict stance on speculative activities has led to stringent regulatory measures. Jie also warned individual investors of the inherent risks in cryptocurrency investments, stressing that the law may not provide protection in cases of financial loss.

The ruling emerged from a contractual dispute between two companies over token issuance, which Chinese law deems illegal. The court ordered that all payments involved in the agreement be refunded, reinforcing the prohibition of token issuance activities.

A Complex Relationship with Digital Assets

China’s regulatory stance on digital assets has evolved significantly since 2017, when the government banned local exchanges and initial coin offerings (ICOs). Subsequent measures included prohibiting block reward mining, forcing miners to either relocate or cease operations.

Despite these restrictions, China’s influence in cryptocurrency mining persists. As of September, data from CryptoQuant revealed that Chinese mining pools accounted for 55% of the global Bitcoin mining hashrate, surpassing the United States’ 40%.

Chinese courts have also issued multiple rulings upholding the property rights of digital asset owners. For instance, a court in Xiamen recently ruled that digital assets are protected as property under Chinese law, further affirming the nuanced legal landscape surrounding cryptocurrencies in the country.

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