For years, the ownership of Bitcoin and cryptocurrencies has been controversial in China, raising policy issues. However, a recent ruling from a Shanghai court clarified that it is completely legal for citizens to hold, buy, and sell Bitcoin or other cryptocurrencies.
Judge Sun Jie of the Shanghai Songjiang People's Court published an article on WeChat explaining that it is not illegal for Chinese citizens to hold cryptocurrencies, although the court has ruled that business entities cannot freely hold, buy, or sell cryptocurrencies. Jie's insights are part of the review of a lawsuit involving the initial coin offerings of two companies, which is illegal in China.
Token issuance is still illegal
Judge Sun Jie's comments are part of the review of a 2017 case involving two companies engaged in digital assets. According to the record, an agricultural company indicated its intention to finance digital assets. It then collaborated with an investment company to draft a white paper and issue tokens.
A court in Shanghai issued an opinion stating that personal ownership of cryptocurrencies does not violate Chinese law, providing clear legal clarity for cryptocurrency holders in mainland China amid skyrocketing Bitcoin prices.
The agricultural company then approved the blockchain incubator agreement with the investment company. After drafting the token's white paper, the investment company received a service fee of 300,000 yuan. Under this premise, the agricultural company expected the investment company to release the tokens. This marked the beginning of a misunderstanding that led the company to seek a full refund.
The planned token financing and release is 'possibly illegal'
In Judge Jie's notes, the planned financing and release of these tokens may be illegal. The planned initial coin offering falls under illegal public financing. The court ruled that no organization or individual may illegally finance or issue digital assets.
The court deemed the agricultural company's complaint invalid because the planned financing and token release are illegal. Nevertheless, after careful evaluation, the court instructed the investment company to compensate 250,000 yuan.
The court raised concerns about the risks of cryptocurrencies
In the same statement, Judge Sun Jie explained that holding cryptocurrencies is not illegal. However, she clarified that due to the associated risks, the Chinese government has implemented strict restrictions.
However, due to the impact of cryptocurrency use on financial and economic order, the rules regarding cryptocurrencies have changed in business. Judge Sun Jie stated that these are the main reasons for the strict regulations imposed by Chinese law on the use of cryptocurrencies.
China first banned initial coin offerings in 2017 and shut down online cryptocurrency exchanges. Authorities continued to crack down on cryptocurrencies in 2021, even banning mining and other cryptocurrency-related businesses.