Introduction
Cryptocurrency represents a digital or virtual form of currency secured by cryptographic means, typically operating on blockchain technology within decentralized systems. Unlike traditional fiat currencies issued by sovereign governments and regulated by central banks, cryptocurrencies lack central bank backing, relying instead on distributed ledger technology for transaction verification and recording. Despite their innovative features, cryptocurrencies pose significant challenges in fraud prevention, speculation, and regulatory oversight—prompting governments worldwide, including China, to closely monitor their development while fostering blockchain technology adoption.
China’s Legal Framework for Cryptocurrencies
Since 2013, Chinese regulatory bodies have issued a series of authoritative notices addressing cryptocurrency transactions. Although these notices do not constitute formal laws or judicial interpretations, courts frequently reference them in rulings. Key regulatory milestones include:
1. 2013 Notice: Bitcoin Risk Prevention
- Classified Bitcoin as a "virtual commodity" rather than legal tender.
- Prohibited financial institutions from engaging in Bitcoin-related activities (e.g., pricing services, trading, or acting as central counterparties).
- Banned Bitcoin-related services like registration, trading, settlement, and custody.
2. 2017 Announcement: ICO Ban
- Outlawed cryptocurrency-based fundraising, including Initial Coin Offerings (ICOs).
- Prohibited platforms from facilitating token-to-fiat exchanges or providing trading intermediaries.
3. 2021 Notice: Expanded Virtual Currency Crackdown
- Declared all virtual currency-related business activities as "illegal financial activities."
- Stated that investments in cryptocurrencies violate public order, rendering related civil contracts void.
- Emphasized that participants bear their own losses, with potential legal consequences for disrupting financial秩序.
👉 Understanding China’s crypto regulations
Legal Status of Cryptocurrencies in China
Chinese courts generally recognize cryptocurrencies as protected virtual assets due to their economic value, scarcity, and transferability. Notable cases include:
- Beijing No.1 Intermediate Court (2018): Affirmed that "Bitcoin can be legally held by individuals."
- Shanghai No.1 Intermediate Court (2019): Ruled Bitcoin qualifies as virtual财产 due to its mining process involving resource investment and labor.
- Post-2021 Rulings: Courts continue acknowledging cryptocurrencies as虚拟财产 but often void transactions.
Validity of Cryptocurrency Transactions
Court attitudes have shifted dramatically post-2021:
- Pre-2021: Some courts upheld交易效力 (e.g., Wuhan and Beijing cases validating Bitcoin借贷协议 and Tripio币 contracts).
Post-2021: Courts increasingly dismiss cases, citing加密货币交易不受法律保护:
- Changzhou Intermediate Court (2021): Dismissed a Bitcoin借贷案, stating private Bitcoin trades lack legal protection.
- Zhejiang Taizhou Court (2022): Ruled Bitcoin’s lack of "legal economic evaluation标准" makes disputes non-justiciable.
Invalidation Consequences:
- Restitution Ordered: Some courts mandate返还不当得利 (e.g., Shanghai嘉定区法院 requiring Bitcoin returns).
- Losses Borne by Participants: Others deem risks self-assumed (e.g., Beijing cases rejecting compensation claims).
👉 Navigating crypto交易 risks in China
Key Judicial Trends
- Supreme People’s Court Guidance: Affirmed in 2018 Case 199 that arbitral awards supporting Bitcoin-fiat conversions violate public interest, leading to裁决撤销.
- Unified Direction: Post-2021, courts consistently invalidate contracts involving加密货币 to维护金融秩序.
FAQs
Q1: Is owning cryptocurrency illegal in China?
A: No. Courts recognize个人持有 as legal, but交易 may be deemed无效.
Q2: Can I sue for unfulfilled Bitcoin contracts?
A: Unlikely post-2021. Courts often dismiss such cases or rule contracts void.
Q3: Are mining rewards protected?
A: Yes, if classified as virtual property, but mining itself is banned.
Q4: How does the 2021 notice impact existing holdings?
A: Holdings remain legal, but trading/conversion lacks protection.
Q5: What happens if my crypto transaction is voided?
A: Depends on the court—some order restitution, others leave losses with participants.
Conclusion
China’s judiciary acknowledges cryptocurrencies as virtual assets but strictly limits their transactional validity under current regulations. Investors should:
- Consult legal experts before entering crypto-related agreements.
- Prepare for合同无效 risks and potential loss exposure.