China’s Supreme Court has, in recently issued guidelines, ruled that virtual currencies can be used to settle a debt, provided that both parties agree to it.
The ruling shows that despite China’s blanket ban on cryptocurrencies, the regulation of its crypto sector is continuously evolving.
According to the ruling, parties interacting with one another can use cryptocurrencies to settle debts that arise from labor service, mutual exchange, and other basic human interactions. However, the use of cryptocurrencies would be considered legal only if both parties agreed to it. In this particular scenario, the court ruled that cryptocurrencies have network virtual properties. However, it also stressed that such an approach would be valid only if there were no other valid reasons against it. The court, in its ruling, stated,
“If it is agreed between the parties that a small amount of virtual currency shall be used to compensate the debts arising from mutual exchange, labor service, and other basic relations, if there are no other invalid causes, the people’s court shall recognize the contract as valid.”
Furthermore, the court clarified that if one party transfers cryptocurrency to another and the receiving party cannot fulfill their responsibility towards the deal, then the court would determine compensation. This compensation would be determined based on the property’s actual value that the receiving party accepts at the time of the contract signing.
China’s stance regarding cryptocurrencies has been a little confusing for investors and users lately. While there is a blanket ban on cryptocurrencies in force, there is some flexibility in the interpretation and enforcement of rules. The Supreme Court ruling shows that the regulation of China’s digital asset space is continuing to evolve and is a positive development.
In 2022, the Beijing Number One Intermediate People’s Court ruled that citizens could still trade cryptocurrencies as virtual assets. However, they could not use them as currency. The ruling allowed investors to explore and use the potential of cryptocurrencies despite the blanket ban. Provided they have access to the correct guidance and understanding of the legal framework, investors could make informed decisions and take advantage of cryptocurrencies. As a result, it remains unclear if the Chinese government recognizes the legal status of cryptocurrencies following the supreme court ruling.
In one ruling dealing with the instance of an outstanding loan case, the Beijing Number One Intermediate People’s Court ruled that crypto could be considered as a property of an individual, just like data. The court added that the virtual asset fails to meet the standards of a currency and falls under the bracket of personal property.
Investor Interest SurgingDespite the blanket ban on crypto in China, investor interest in digital assets has gone through the roof recently. According to a report published in 2022, China was ranked in the top ten countries in the global crypto adoption index. China has also hinted that it acknowledges the growing interest in cryptocurrencies. One report revealed that the country had implemented a 20% income tax on profits made by Bitcoin miners and individual cryptocurrency investors. This shows that while the legal status of cryptocurrencies is yet to be determined, China has noted the growing investor interest in them. However, investors must ensure they are up to date with the ever-evolving guidelines around crypto in China.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
