The People’s Republic of China closely regulates financial products and services within its jurisdiction. Virtual currency represents a stark ideological opposition to this top-down centralized control, and Chinese financial regulators have never taken kindly to them. However, a recent arbitration decision deeming cryptocurrency assets legal property in China is giving advocates hope that the PRC is slowly easing its tight grip on the mainland’s cryptocurrency markets.
Cryptocurrency Earns Legal Recognition in Chinese Courts
The Shenzhen Court of International Arbitration (SCIA), the branch of China’s court system responsible for resolving disputes in arbitration, recently ruled that Bitcoin assets will be treated as legal property. The case at issue before the SCIA addressed the issue of whether a Chinese investor who invests using cryptocurrency is entitled to the same protection of the nation’s investment laws as an investor using traditional money.
An investor filed suit in the SCIA against a person employed to manage around half a million dollars’ worth of Bitcoin assets. The plaintiff, a private investor, brought the case against the asset manager after he allegedly refused to return the Bitcoin assets to the investor after a dispute regarding business strategy. The assets manager, however, argued that there was no legal recourse for the investor to retrieve his funds since they were in the form of cryptocurrency. Because Bitcoin and cryptocurrency assets were not recognized as a form of currency in China, the defendant claimed, there were no ‘funds’ to be returned.
After considering the facts of the case, the arbitrator dismissed the defendant’s reasoning. The SCIA ruled that regardless of the fact that China does not recognize cryptocurrency as a form of legal currency, it is not illegal to own. Rather, virtual currency assets are personal property. As such, and like any other personal property, cryptocurrency owners deserve the full protection of Chinese law.
SCIA Ruling Foreshadows Shift in Policy
This landmark ruling may have been passed down from a local arbitration court, but it indicates a larger shift in China’s approach to cryptocurrency. And while some media outlets are claiming that this case ends the nation’s de facto ban on using and trading cryptocurrencies, it’s important to understand that progress in this regard will be gradual.
Notably, the SCIA’s ruling does not have any influence on China’s existing financial regulations. However, the precedent set by the SCIA does indicate that Chinese citizens may have grounds to claim their crypto assets as personal property for other legal disputes in the future. This ruling could help boost digital coin activity on the mainland providing investors and consumers with the confidence of knowing that their transactions are protected by the Chinese courts.
This case could earmark a turning point in China’s larger policies regarding cryptocurrencies and blockchain technology. The country’s regulations had previously left very little wiggle room for the use of cryptocurrencies. China’s government has had a notably restrictive stance on cryptocurrency, and this case has significantly changed the tone surrounding fintech policies in the PRC.
China’s approach to regulating cryptocurrency has recently begun to soften. Adoption of blockchain technology on the mainland has been soaring, and cryptocurrency would surely follow suit if it were unburdened by financial regulations. While we’re unlikely to see a total reversal of the PRC’s restrictive digital currency regulations, the recent ruling of the SCIA will now allow Chinese citizens interested in cryptocurrency or blockchain technology to explore this new world without fear. And with a growing number of cryptocurrency platforms like Halo Platform offering localized divisions for Chinese markets, there are plenty of fintech innovations for this growing marketplace to explore.
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