Cryptocurrency deemed a legal commodity in Shanghai, says judge

A recent article by Judge Sun Jie in the People’s Court of Songjiang District in Shanghai sheds light on the legality of owning virtual currency in China. The judge’s opinion comes from a 2017 business dispute but reveals the ambiguous legal status of cryptocurrency in the country.

In the case in question, an agricultural development company entered into a “Blockchain Incubation Agreement” with an investment management company to create a white paper for the issuance of a cryptocurrency. Despite paying 300,000 yuan for the service, no token was produced a year later. The investment company claimed that the agricultural company needed to develop an app before issuing the token, leading to a legal battle.

Judge Sun Jie deemed virtual currency to be a commodity with property attributes, rather than fiat currency. She highlighted that while individuals can own virtual currency, commercial entities are restricted from participating in investment transactions or issuing tokens on their own.

The judge also warned about the risks associated with cryptocurrency trading, mentioning how it can disrupt economic and financial order and facilitate illegal activities like money laundering and fraud. Therefore, she advised individuals and enterprises against blindly engaging in virtual currency transactions to ensure legal protection.

Despite China’s crackdown on virtual currency exchanges in 2017 and increased control over transactions in 2021, owning cryptocurrency has never been explicitly prohibited. This recent commentary by Judge Sun Jie provides valuable insights into the legal landscape surrounding virtual currency in China.