Virtual assets in China can be legally used to settle basic relations debts such as exchange and labor, despite the nation’s ban on cryptocurrency transactions, the Supreme People’s Court of China declared in a conference earlier this year.
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Fast facts
- The Supreme Court said in a January conference on financial trials that cryptocurrencies share some attributes of virtual properties, and if the parties in a case agree to use small amounts of cryptocurrencies to settle their debts, the contract should be considered valid by the Chinese courts.
- If the cryptocurrency transaction cannot be executed due to policy restrictions, the court will determine the compensation based on the actual value of the agreed amount of cryptocurrencies when the contract was signed.
- The Supreme Court added that courts will not accept any complaints from users if the cryptocurrency was traded after Sept. 4 2017 — the date when the Chinese government issued a ban on initial coin offerings and crypto exchange services — and if trading platforms or token issuers failed to fulfill liquidation obligations.
- The records further clarified that the use of cryptocurrencies as payments for fiat currencies or physical commodities under the guise of a contract shall be regarded as illegal.
- The conference records align with the Chinese government’s stance on cryptocurrencies, which emphasizes that cryptocurrencies such as Bitcoin, Ether and Tether do not have the same legal status as fiat money. China issued a blanket ban on cryptocurrency transactions in September 2021.
- Outside mainland China, Hong Kong’s initiatives to build a crypto hub is receiving Beijing’s backing, with Chinese state-owned financial institutions providing banking services to local crypto firms.
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