Shanghai Court Recognizes Virtual Currency as Property, Steps Up Crackdown on Illegal Trading
Date: 2024-11-20 Author: Gabriel Deangelo Categories: IN WORLD
The Shanghai Songjiang District People’s Court ruled on November 19 in a service contract dispute that centered on the legality of issuing virtual currency.
The Shanghai Supreme Court ruled that cryptocurrencies have “property characteristics” under Chinese law, which protects them as property.
However, the court stressed that this recognition does not apply to the use of cryptocurrencies as official financial instruments or currencies.
The case dates back to 2017, when an agricultural company decided to take advantage of the rising value of Bitcoin and Ethereum to attract investment by issuing its own cryptocurrency. To implement this plan, the company contracted with an investment firm to develop a white paper and issue tokens via the blockchain. A fee of 300,000 yuan was agreed upon for these services under the “Blockchain Incubation Agreement.”
A year later, the tokens had still not been issued. The investment firm claimed that an app needed to be developed to fulfill the obligations, which was beyond the scope of the original contract. Unhappy with the delays, the company went to court to demand that the contract be terminated and the funds paid be returned.
The court ruled that the contract was invalid because it involved illegal financial activities, namely, illegal fundraising. The judge noted that issuing tokens without official permission violated China’s financial transaction laws, including the prohibition of illegal securities issuance, financial fraud, and pyramid schemes.
Both parties were found to be incapable of issuing the tokens legally, and their contract was found to be in violation of financial regulations and economic order. The investment firm was ordered to return 250,000 yuan, while the remaining claims of the agricultural company were dismissed.
Both parties agreed with the decision, which now has legal force.
