China’s Murky Crypto Legal Status: A Virtual Commodity With ‘Property Attributes,’ Rules Shanghai Court

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.

A judge in China has given her opinion on the legality of cryptocurrency in the country, in an article about a business dispute over the failure to produce a white paper for a virtual currency.

The judge’s comments shed light on crypto’s murky legal status in China, where ownership of digital assets is not banned but exchanges were ordered to close down in 2017.

The agricultural development company signed a “Blockchain Incubation Agreement” with the investment management company in 2017. The agricultural company paid 300,000 yuan (about $44,400 at the time) for the investment company to produce a white paper as the basis for the issuance of a cryptocurrency.

However, a year later, no token had been produced, and the investment company said the agricultural company needed to develop an app before the token could be issued. The agricultural company instead applied to the court to recover the money it had paid.

The court ruled that the companies’ agreement envisioned illegal activities, for which both parties bore responsibility. It ordered the investment company to return 250,000 yuan.

The judge, Sun Jie, wrote that virtual currency does not have the status of fiat currency, but is instead a virtual commodity with “property attributes.” She stated:

“Virtual currency, as a specific virtual commodity, is not protected by the state. Individuals and enterprises, by blindly participating in virtual currency transactions, will not have the complete protection of the law.”

The article also reproduces Article 153 of the Civil Code of the People’s Republic of China, as it is the relevant legislation to the case.

China’s central bank and 10 government agencies joined forces in 2021 to tighten control over transactions with virtual currencies.