The Shanghai High Court has once again confirmed that virtual currencies (cryptocurrencies), which are considered a type of virtual commodity, have the nature of property under Chinese law.
According to the Document Published by the Court, Cryptocurrencies Are Not Prohibited, Businesses Related to Them Are Prohibited
However, the Shanghai High Court of China stated that virtual currencies, as a virtual commodity, have property characteristics and are not prohibited by Chinese law.
According to the official statement, although this means that cryptocurrencies are not completely banned, commercial activities related to them remain under strict legal restrictions.
Chinese authorities are taking a “high-pressure” stance against trading and speculative activities involving cryptocurrencies, citing risks of illegality and financial instability.
The issue of the legality of cryptocurrencies was recently brought up in the Songjiang District People's Court in Shanghai.
In 2017, amidst the surge in Bitcoin and Ethereum prices, an agricultural development company referred to as Company X sought to issue tokens and raise funds. Partnering with an investment management firm, Company S, the two parties signed a “Blockchain Incubation Agreement.” Under the agreement, Company S would prepare a white paper and issue tokens using leading blockchain technologies such as Bitcoin and Ethereum’s smart contracts.
Following the agreement, Company X paid Company S a 300,000 yuan service fee for the preparation and execution of the token issuance. However, the legality of the initiative has come under scrutiny as China’s regulatory framework explicitly prohibits cryptocurrency-related activities such as token issuance and financing, and considers them to be illegal financial activities.
*This is not investment advice.