In a groundbreaking decision that reverberates through China’s cryptocurrency landscape, a local court in the southeastern city of Xiamen has upheld that cryptocurrency enjoys legal protection as property under the country’s existing legal and policy framework. This assertion, articulated in an opinion article published in People’s Court Daily, a newspaper affiliated with the Supreme People’s Court, has ignited a discourse on the status and rights of cryptocurrency owners within the nation.
According to the Xiamen court’s ruling, cryptocurrency should be recognized as property, and its ownership rights should be safeguarded by law, except in cases where virtual assets are involved in criminal activities or were acquired through unlawful means.
This landmark verdict comes against the backdrop of China’s enduring efforts to tighten its grip on cryptocurrency-related activities over the years. While the special administrative region of Hong Kong has recently embraced virtual assets and opened up cryptocurrency trading for retail investors, mainland China has steadfastly maintained a stance of hostility towards cryptocurrencies.
However, the legality of virtual assets has been a subject of ongoing debate within China’s regulatory landscape. The Xiamen court’s opinion piece signifies a growing acknowledgment among Chinese authorities that ownership of cryptocurrencies, categorized as virtual commodities, merits legal protection.
The court’s rationale for classifying cryptocurrency as property is grounded in its “economic attributes,” which encompass utility and exchange value. These attributes, it argues, exist objectively as cryptocurrencies circulate openly in overseas markets, further substantiating their status as property.
To provide context, in September 2021, China’s government agencies escalated its cryptocurrency ban by declaring a wide array of cryptocurrency-related activities as illegal financial undertakings. However, it’s important to note that the notice primarily targeted cryptocurrency businesses and did not universally brand all cryptocurrency transactions as illegal, as underscored by the Xiamen court.
Hong Kong, the special administrative region, set a precedent earlier this year by recognizing cryptocurrency assets as property. In a significant ruling in March, the Hong Kong High Court established that cryptocurrencies constitute property and can be entrusted in a trust. This decision equated cryptocurrency with other intangible assets such as stocks and bonds, aligning Hong Kong with other common law jurisdictions and offering valuable legal clarity for a spectrum of cryptocurrency-related matters.
Nevertheless, it’s worth noting that mainland China’s local courts remain divided on cryptocurrency-related rulings. Consequently, cryptocurrency holders have at times found themselves with limited recourse when confronted with legal disputes.
In the past, a court in Shanghai invalidated a car sale conducted using virtual currency, deeming it “invalid” due to violations of mandatory legal provisions and administrative regulations. Moreover, the High Court in Shandong province ruled in 2021 that “investing or trading cryptocurrency isn’t protected by law.”
This latest development occurs amidst an ongoing regulatory crackdown on cryptocurrency-related activities, with recent instances involving criminal charges against executives of a Filecoin mining firm, alleging involvement in a pyramid scheme worth over 600 million yuan (US$83 million).
The case of Xiao Yi, a former senior provincial official who was dismissed in 2021 for supporting a cryptocurrency mining firm, serves as another striking illustration. He was recently sentenced to life imprisonment, further highlighting the intensifying scrutiny and consequences faced by individuals entangled in cryptocurrency activities in China.
