Are Crypto Assets Protected In China?

While China’s law does not provide a clear legal definition for cryptocurrency, the property attributes of Bitcoin have indeed been legally recognized. This recognition stems from the first article of the “Notice on Preventing Bitcoin Risks,” which emphasizes that Bitcoin should be considered as a specific virtual commodity rather than having the same legal status as traditional currency. It explicitly states that Bitcoin should not and cannot be used as a circulating medium in the market.

Based on this understanding, cryptocurrency, in general, can be recognized as virtual commodities, drawing upon the distinctive attributes of Bitcoin. To support this viewpoint, I would like to reference the reasoning provided by the Shanghai First Intermediate People’s Court, which states that although Bitcoin lacks the characteristics of traditional currency and cannot be utilized for circulation like legal tender, it falls under the category of network virtual property, possessing identifiable property attributes that warrant legal protection.

Things get complicated when cryptocurrency is involved in activities like buying mining machines, such as Antminers. China deems such contracts as invalid contracts, and there are two contradicting laws with regard to this issue. The “Notice on Further Preventing and Dealing with Risks Associated with Cryptocurrency Trading Speculation,” specifies that any losses incurred as a result of cryptocurrency investments should be borne by the individuals themselves, which means the claims of plaintiffs will be dismissed and courts will refrain from supporting the return of consideration already provided by the parties involved.

However, Article 157 of the Civil Code, states that when a civil legal act is declared invalid, revoked, or deemed to have no legal effect, any property obtained by a party through that act should be returned. If direct restitution is not possible or deemed unnecessary, compensation should be provided at a discounted value. Under this law, money would have to be refunded.

In conclusion, Bitcoin and cryptocurrencies, in general, possess distinct property attributes that have been recognized under the law. While there may be differing opinions across courts, it is essential to ensure consistency and fairness in the treatment of such investments.