The 2 Chinese systems for crypto: forbidden trade, protected virtual assets

Beijing’s First Intermediate People’s Court said in a verdict that although China bans crypto trading, cryptocurrencies can be protected by law as a kind of virtual asset.

The mid-tier court said in an appeal brief made public on September 7 that cryptocurrencies should be considered virtual property, as Chinese central bank joint announcement in 2013 stated that “Bitcoin should be, by its nature, a specific virtual commodity.”

The court said “there are no statutes, by-laws, or departmental rules that negate the protection of cryptocurrency itself as virtual property.”

See related article: Crypto Market Shaken as China Declares All Crypto Transactions Illegal

The court’s decision comes in response to an appeal regarding a Litecoin refund dispute. In this case, the claimant Ding Hao refused to accept a first instance judgment to return the Litecoins that Ding had borrowed from the claimant, Zhai Wenjie. The caller argued that cryptocurrency trading is not protected by law in China and therefore he was unable to obtain Litecoin through legitimate channels to repay the debt.

In the first trial, Ding was sued by Zhai for borrowing 50,000 Litecoins and failing to return all borrowed Litecoins as agreed. The first lawsuit ordered Ding to return 33,000 Litecoins to Zhai for the unreturned amount.

Zhai refuted Ding’s appeal as he argued that the crypto ban is only a regulatory notice, not a ban on all cryptocurrency-related contracts, and has no impact on Ding’s performance obligations. He also argued that cryptocurrencies are essentially virtual assets and that their transactions in litecoins were loans between friends and fell outside the scope of investment and financing practices, and therefore should be protected by the law. law.

The court dismissed the appeal and upheld the original verdict ordering Ding to return 33,000 Litecoins to Zhai.

Courts disagree on whether cryptocurrencies should be protected by law

It was not the first time that Chinese courts recognized the virtual asset attributes of cryptocurrencies. In May, the Chaoyang Primary People’s Court in Beijing said in a decision that Chinese regulations “do not negate the ownership attribute of cryptocurrencies as virtual goods, and that Chinese administrative laws and regulations do not prohibit the holding and transfer of Bitcoin”.

Also, in May, the People’s High Court of Shanghai commented that “in the practice of the trial, the People’s Court formed a unified opinion on the legal positioning of Bitcoin, identifying it as virtual property” on its verified social media account.

But other courts have disagreed. Chongqing Zhongxian Primary People’s Court said in a judgment made public in July that entrusting others with investing in cryptocurrencies is an invalid civil act under the crypto ban. In June, the Sichuan People’s Court Free Trade Pilot Zone said in a judgment that investing in crypto is an unapproved and illegal act that cannot be protected by law.

In June, the Fengxian Primary People’s Court in Shanghai ruled that a contract involving the purchase of a car by cryptocurrency was invalid. The court said this was because buying a vehicle with cryptocurrency to replace fiat currency violated the central bank’s rule against accepting bitcoin as fiat. And according to Chinese contract law, contracts that violate the mandatory provisions of Chinese administrative regulations are invalid.

See related article: NFT marketplaces tasked with preventing counterfeits, Chinese court rules

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