In a recent report titled “Identification of the Property Attributes of Virtual Currency and Disposal of Property Involved in the Case,” a People’s Court in China concluded that virtual assets possess economic attributes and should be classified as property. The report emphasized that virtual assets held by individuals should be deemed legal and protected by law under the current policy framework. This is significant considering the blanket ban imposed by China on all foreign digital assets.
While China has maintained a hostile stance towards cryptocurrencies, the courts have shown a contrasting perspective over the years. In September 2022, a lawyer suggested that crypto holders in China would still be protected by the law in case of theft, misappropriation, or breach of a loan agreement, despite the ban on crypto. Subsequently, in May 2022, a Shanghai court affirmed that Bitcoin qualifies as virtual property and is subject to property rights.
The recent report also outlined suggestions for dealing with crimes involving virtual assets. It proposed that in cases where money and property cannot be confiscated, a unified criminal and civil law approach should be adopted. This would ensure a balanced protection of personal property rights and social/public interests.
Although China categorically banned all crypto-related activities and prohibited foreign crypto exchanges from serving mainland customers, the acknowledgment of virtual assets as legal property by the People’s Court indicates a departure from the rigid national policy. This shift aligns with the gradual softening of the government’s stance on cryptocurrencies in recent years.
Interestingly, China’s stance on Bitcoin mining has also changed. After the blanket ban, China’s Bitcoin mining share had dropped to zero, but within a year, it regained the second spot. These developments suggest a more nuanced perspective emerging within the Chinese government regarding virtual assets.
The recognition of virtual assets as legal property by the People’s Court carries significant implications. It establishes a framework for individuals to lawfully hold and transact with digital assets, despite the broader ban. This acknowledgment also presents opportunities for future regulatory developments that may involve legal frameworks surrounding virtual assets.
The Chinese government’s evolving stance on virtual assets is an indication of the nascent stage of cryptocurrency regulation across the globe. As digital assets continue to gain mainstream acceptance and economic relevance, governments worldwide are grappling with the need to strike a balance between regulation and innovation.
It remains to be seen how this recent report will impact China’s overall approach to virtual assets and whether it will lead to further regulatory reforms. Nevertheless, the recognition of virtual assets as legal property by the People’s Court represents a notable development in the Chinese legal system’s understanding and treatment of cryptocurrencies.