In recent years, the legal status of virtual currency in China has remained a topic of intense debate. Despite strict regulatory controls on cryptocurrency trading and financial activities, a landmark article published in People’s Court Daily—an official publication under the Supreme People’s Court—has clarified that virtual currency is recognized as legal property and is entitled to judicial protection under Chinese law.
This authoritative legal analysis, authored by judges from the Siming District People’s Court in Xiamen, Fujian Province, provides crucial insights into how Chinese courts interpret the nature of virtual assets. It emphasizes that while virtual currencies like Bitcoin are not legal tender, they possess economic value and fall within the scope of protected property unless directly tied to illegal activities.
Understanding the Legal Status of Virtual Currency in China
Virtual Currency Is Not Legal Tender—but Still a Protected Asset
China has consistently maintained a strict stance against the use of virtual currencies as a medium of exchange. The government prohibits financial institutions from offering crypto-related services and bans domestic cryptocurrency exchanges. However, this does not equate to declaring virtual currency itself illegal.
The article underscores a key distinction: lack of monetary status does not negate property rights. Drawing on existing regulations such as the 2013 joint notice by the People’s Bank of China and other regulatory bodies (“On Preventing Bitcoin Risk”), virtual currencies are classified as “specific virtual commodities.” This classification aligns with Article 127 of China’s Civil Code, which explicitly recognizes the legal protection of network virtual property.
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Exchange Value Cannot Be Ignored
One of the core arguments in the article is that virtual currency holds objective exchange value, especially due to its legal recognition and active markets abroad. Countries including Japan, the U.S., and members of the EU have integrated certain cryptocurrencies into their financial systems. With over 30,000 crypto ATMs operating across 73 countries, the global legitimacy of digital assets cannot be dismissed.
Even though China restricts domestic circulation, the economic reality of virtual currency remains intact. Denying its value would undermine efforts to recover assets in criminal cases—such as theft or fraud involving crypto—and result in unjustified loss of property.
Why Virtual Currency Qualifies as a Protected Legal Asset
1. Economic Utility and Functional Use
Virtual currency serves practical functions beyond mere speculation:
- Settlement Medium: In blockchain-based securities clearing systems, “settlement coins” backed by fiat reserves enable secure, instant transactions.
- Digital Credentials: Blockchain tokens can represent tickets, voting rights, or in-game items—ensuring authenticity and preventing tampering.
- Decentralized Transactions: Cryptocurrencies facilitate peer-to-peer value transfer without intermediaries, enhancing financial accessibility globally.
These uses demonstrate real-world utility, reinforcing their classification as valuable digital assets rather than mere data.
2. Protection Against Theft and Fraud
The article argues that illegally obtaining someone else’s virtual currency—through hacking, phishing, or deception—should be treated as a property crime, not merely a cyber offense.
Treating such acts solely under computer crime statutes (e.g., illegal access to information systems) fails to address the true harm: theft of economic value. By analogy, even contraband like drugs may be subject to theft charges because the law protects possession, regardless of legality.
Thus, the authors advocate for applying theft, robbery, or fraud charges when virtual assets are stolen—provided the victim holds them lawfully.
Regulatory Framework: What Is and Isn’t Prohibited
Clarifying the 2021 Ten-Department Notice
A major source of confusion stems from the 2021 interagency directive (“On Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation”). While it bans:
- Crypto-to-fiat exchanges
- Crypto derivative trading
- Token issuance (ICO)
- Acting as a market maker
It does not outlaw all individual transactions. The key term is “business activities.” Occasional peer-to-peer trades or one-time sales—such as an individual selling inherited crypto—do not constitute regulated financial operations.
Courts have consistently ruled that while contracts aimed at profiting from crypto speculation may be void for violating public order, the underlying asset remains legally held.
Civil Rulings Support Property Rights
Judicial practice reflects this nuanced view. A 2022 Supreme People’s Court ruling (Case No. 1581 of 2022) invalidated a software development contract intended to mine cryptocurrency due to public interest concerns—but still ordered repayment of funds, recognizing mutual fault without treating the money as illicit.
Similarly, lower courts have refused to confiscate virtual assets in civil disputes, instead returning them or compensating parties based on market value at the time of transaction.
Handling Virtual Currency in Criminal Cases
Differentiating Victim Circumstances
The article proposes a balanced approach to asset recovery in criminal proceedings:
Case 1: Victim Engaged in No Trading Activity
If a person is robbed or hacked without any intent to trade (e.g., holding crypto as investment), their full restitution should be pursued. Courts should:
- Order return of seized virtual currency
- Calculate damages based on purchase price or recent market rates
- If pricing data is unavailable (due to lack of domestic exchanges), exclude valuation from sentencing but still recognize the crime
Case 2: Victim Involved in Speculative Trading
When victims participate in high-risk or repeated trading—especially if origins are unclear or linked to illicit purposes—their own misconduct reduces entitlement to compensation. In such cases:
- Full recovery may be denied
- Proceeds from confiscated crypto can be sold internationally via legal channels and deposited into state coffers
This framework ensures proportionality between individual rights and public policy goals.
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Frequently Asked Questions (FAQ)
Q: Is owning cryptocurrency illegal in China?
A: No. While trading and financial services involving crypto are banned, private ownership is not prohibited. Holding virtual currency as personal property remains legally permissible.
Q: Can I sue someone who stole my Bitcoin?
A: Yes. Courts recognize theft of virtual currency as a property crime. You may seek criminal prosecution and civil compensation if evidence supports unlawful appropriation.
Q: Are profits from crypto trading protected by law?
A: Not necessarily. While the asset itself is protected, income derived from speculative trading may be deemed invalid if it violates financial regulations or public order.
Q: Can police seize my crypto?
A: Authorities may freeze or seize digital assets during investigations, especially if linked to money laundering or fraud. However, innocent holders can challenge seizures in court.
Q: Will China ever legalize crypto trading again?
A: There are no current indications of policy reversal. The focus remains on central bank digital currency (CBDC), not decentralized cryptocurrencies.
Q: How do courts value stolen crypto without domestic exchanges?
A: Judges may refer to international exchange rates, prior transaction prices, or expert appraisals. If no reliable data exists, valuation may be omitted from sentencing—but the crime still stands.
Conclusion: A Balanced Legal Framework Emerges
Despite China’s stringent regulations on cryptocurrency markets, this judicial analysis confirms a critical principle: virtual currency is legitimate property under the law. As long as it is not obtained or used illegally, individuals retain ownership rights that courts are obligated to protect.
This evolving legal clarity benefits both law enforcement and citizens—enabling effective prosecution of cybercrime while safeguarding personal digital wealth.
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Policymakers, legal professionals, and investors alike must recognize that technological innovation demands adaptive jurisprudence. By distinguishing between illegal activity and lawful asset holding, China’s judiciary is laying the groundwork for a more rational and equitable digital economy.