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

The mid-level court said in an appeal case file released publicly on Sept. 7 that cryptocurrencies should be considered as virtual properties, as a joint announcement by the Chinese central bank in 2013 said “Bitcoin should be, by its nature, a specific virtual commodity.”

The court said “there are no laws, administrative regulations or departmental rules that negate the protectability of cryptocurrency itself as virtual property.”

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The court’s decision comes in response to an appeal case over a Litecoin repayment dispute. In this case, appellant Ding Hao refused to accept an initial trial judgment to return the Litecoins that Ding borrowed from the plaintiff, Zhai Wenjie. The appellant argued that cryptocurrency trading is not protected by law in China, and that he was therefore unable to obtain Litecoin through legitimate channels to pay off the debt.

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

Zhai rebutted Ding’s appeal as he argued the crypto ban is only a regulatory opinion, 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 their transactions in Litecoins were loans between friends and did not fall in the scope of investment and financing practices, and therefore should be protected by law.

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

Courts disagree on whether cryptocurrencies should be protected by law

This was not the first time Chinese courts have recognized the virtual asset attributes of cryptocurrencies. In May, the Chaoyang Primary People’s Court of Beijing said in a ruling that Chinese regulations “are not denying the property attribute of cryptocurrencies as virtual commodities, and Chinese laws and administrative regulations do not prohibit the holding and transfer of Bitcoin.”

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

But some other courts have disagreed. The Zhongxian Primary People’s Court of Chongqing said in a judgment publicized in July that entrusting others to invest in cryptocurrencies is an invalid civil act according to the crypto ban. In June, the People’s Court of Sichuan Pilot Free Trade 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 of Shanghai ruled that a contract involving the purchase of a car by cryptocurrency was invalid. The court said that is because buying a vehicle with cryptocurrency to replace fiat currency violated the central bank’s rule against accepting Bitcoin as fiat. And according to China’s Contract Law, contracts that violate the mandatory provisions of China’s administrative regulations are invalid.

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