China’s ban on crypto

In September 2021, the People’s Bank of China (PBOC), along with nine other authorities including the Supreme People’s Court (SPC), Supreme People’s Procuratorate (SPP), the Ministry of Public Security (MPS), and the State Administration of Foreign Exchange (SAFE), jointly announced that cryptocurrency is not legal tender in China. Further, the notice determined that all cryptocurrency transactions in China are illegal, including offshore exchanges to provide services to Chinese citizens. In this pronouncement it was made clear that China-based employees of offshore exchanges, and third parties supporting them by providing marketing and promotion, payment and settlement, technical support or other services, will be investigated and prosecuted.

Court rules Bitcoin as property rights

Nevertheless, on 5 May 2022, the Shanghai High People’s Court issued a statement on their official WeChat channel regarding a civil case involving Bitcoin. In commentary, the court held that Bitcoin has virtual property attributes and is therefore regulated by the legal norms of property rights, sparking a new debate over its legal status in China. While not the first court in China to characterise Bitcoin as virtual property (a previous dispute in 2019 at the Hangzhou Internet Court reached a similar determination), it is worth noting this is the first case involving Bitcoin to reach the level of the Shanghai People’s High Court.

In China, the judicial authority of the Shanghai High People’s Court is second only to the Supreme People’s Court.

Will China move to legalise crypto?

Some observers see the Shanghai High Court’s ruling as indicating an increasing trend to recognise Bitcoin as virtual property which may influence future civil disputes involving cryptocurrency. Others, however, point out that under the sweeping prohibition announced late last year, Bitcoin cannot be considered legalised by identifying it as virtual property.

In China’s civil law system, the law means statutes and excludes case law. In other words, because only rules codified by the legislature, the executive, and the judiciary are laws, and except for “Guiding Cases” (指导性案例) selected by the Supreme People’s Court, rulings from lower courts do not often serve as a precedent. For that reason, it remains to be seen what impact the Shanghai High Court’s determination will have on the status of Bitcoin in China.

Contributor:

Toby Graham

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