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Chinese court OKs trading crypto, if it's considered a virtual asset
This may not be in the spirit of Beijing's many bans on blockheads
A Beijing court has ruled that locals are permitted to trade cryptocurrencies – but not use them as a substitute for money.
On face value, the decision of the Beijing Number One Intermediate People's Court may seem odd, given that China's government banned dealing in Bitcoin in 2013 and has extended its prohibition on using digital currency many times since.
Just a few weeks back, in August 2022, Chinese authorities shut down hundreds of social media accounts that promoted cryptocurrency investments on grounds that they promised high returns and downplayed risks of playing in the infamously volatile crypto markets.
The case considered by the Beijing court concerned a dispute regarding a loan of Litecoin, and a promise to pay interest in the virtual currency.
The judges noted China's prohibition on using cryptocurrency as currency, but reasoned that Litecoin can't be considered a currency because it is not issued by a monetary authority and is not supported by the legal and financial frameworks that back an actual currency.
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The court was, however, happy to consider Litecoin a virtual asset – because China has laws governing them. Data, for example, is considered a virtual asset under local law.
The ruling also points out that China has no law against considering cryptocurrency a virtual asset.
With that lack of precedent prohibiting perception of Litecoin-as-asset illegal, and the court satisfied the complainant had proved the defendant borrowed a virtual asset and agreed to return it, the court ordered the return of the Litecoin.
The possibility of legally trading cryptocurrencies, therefore, has gained a toehold in China – although other cases in the past have reached different conclusions.
However, the notion of cryptocurrencies as assets akin to securities has gathered pace elsewhere. India, for example, has taken the position that cryptocurrencies are poor mediums of exchange but that investors should not be prohibited from trading them.
Singapore has taken a similar stance, but with dire warnings that price volatility makes cryptocurrency such a stupidly high-risk investment the island nation may regulate to require government approval before retail investors take the plunge. ®