China court says Bitcoin is a commodity but warns its related uses are illegal

Cryptocurrencies are considered commodities in China and are not explicitly prohibited by law, according to commercial judge Sun Jie at Songjiang District People's Court in Shanghai.

A Shanghai court has stated that cryptocurrencies like Bitcoin (BTC) are considered commodities in China, but any crypto-related activities, including trading, issuance or payments, are deemed illegal financial practices.

The statement was made by commercial judge Sun Jie at Songjiang District People’s Court in Shanghai on Nov. 24. Sun’s statement provided legal guidance on cryptocurrencies during a booming market cycle, which she referred to as the new “gold rush.”

Sun was commenting on a case during the 2017 crypto “gold rush” in which a defendant provided token issuance guidance services to a plaintiff for a cost of 300,000 yuan (around $44,000 at the time). The defendant provided the service by drafting a white paper but did not assist in token issuance, which they believed was the plaintiff’s responsibility.

Sun stated that the contract agreement between the two parties was declared invalid as the crypto-related services outlined in the contract were considered illegal financial activities. However, she added that while it is illegal for commercial entities to issue tokens or participate in transactions, “it is not illegal for individuals to simply hold virtual currency.”

The Shanghai court’s interpretation aligns with a recent case in the Jiahe County People’s Court in Hunan province of South-Central China. According to the municipal-owned media outlet Rednet on Nov. 21, the court recently rejected a plaintiff’s claims that demanded the return of $6.27 million in USDT.

The dispute stems from a November 2021 WeChat agreement in which the plaintiff paid $23.67 million in USDT for crypto mining equipment, but differences between the parties arose over time. The court said that cryptocurrencies like Bitcoin, Ether and USDT are not legal tender and cannot be used as currency. The agreement to deliver crypto mining equipment for USDT was deemed invalid, and the court dismissed the plaintiff’s claims as it did not fall within the scope of legal protection under Chinese law.

The recent election victory of United States President-elect Donald Trump has led experts to suggest that China may ease its strict stance on crypto. Throughout the year, social media chatter fueled rumors that China would reverse its crypto ban, but Beijing has not officially provided any formal indication that it would do so. It has, however, eased restrictions in Hong Kong.