A recent case review published by the Shanghai High People’s Court has reignited discussions about the legal status of Bitcoin in China. Many are asking: does recognizing Bitcoin as virtual property mean it is now fully legal?
On May 5, the Shanghai High Court shared a case involving Bitcoin, marking one of the highest-level judicial commentaries on cryptocurrency to date. This article explores what the ruling means and what it does not imply for Bitcoin’s legal standing.
Background of the Case
The case centered on a dispute between two individuals. In October 2020, the plaintiff, Cheng Yi (pseudonym), filed a lawsuit in the Baoshan District People’s Court in Shanghai, requesting the defendant, Shi Xiaodong (pseudonym), to return one Bitcoin.
The court ruled in February 2021 that the defendant must return one Bitcoin to the plaintiff within ten days of the effective date of the judgment.
However, during the enforcement phase, the court encountered practical challenges. A nationwide online asset inquiry system could not locate any Bitcoin under the defendant’s name. It was also discovered that the Bitcoin had been transferred to a third party whose whereabouts were unknown.
Eventually, both parties agreed to a settlement where the defendant compensated the plaintiff with RMB 84,000, equivalent to the original purchase price of the Bitcoin.
Judicial Recognition as Virtual Property
In its analysis, the Shanghai High Court described Bitcoin as an encrypted digital currency based on blockchain technology. It acknowledged the absence of specific laws and regulations, which leads to uncertainty in enforcement and varied outcomes in practice.
The court stated:
“In judicial practice, courts adopt a pragmatic approach. Without making direct judgments on the legal nature of virtual property, they recognize that it holds economic value and meets the criteria of property. Thus, property law rules are applied for its protection.”
This is not the first time a Chinese court has recognized Bitcoin as virtual property. As early as 2019, the Hangzhou Internet Court, in a case (No. 1626 of 2019), classified Bitcoin as virtual property. Since then, numerous judicial decisions have followed this trend.
However, this case is significant because it is the first such recognition published under the authority of a high people’s court. This raises its influence as a reference, especially in civil disputes involving Bitcoin within Shanghai.
Does This Mean Bitcoin Is Legal in China?
The term “virtual property” is a legal concept, but it does not equate to full legality under Chinese law.
Back in 2013, Chinese regulatory bodies, including the People’s Bank of China, issued the “Notice on Preventing Bitcoin Risks,” which referred to Bitcoin as a “specific type of virtual commodity.” While this term acknowledges its economic attributes, it is not a legal definition.
In recent years, regulatory measures have tightened. In September 2021, ten government agencies, including the Central Bank, jointly released a notice that classified virtual currency-related business activities as illegal financial activities.
This indicates that although Bitcoin can be considered property in civil contexts, engaging in trading, exchange, or fundraising activities using Bitcoin remains prohibited and may be treated as a criminal offense.
The recent revision of the “Interpretation on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Illegal Fundraising” further includes virtual currency交易 as a form of illegal fundraising.
Therefore, recognizing Bitcoin as virtual property does not legalize its use as currency, nor does it permit related business operations.
Practical Implications
This ruling provides clearer legal protection for individuals in civil disputes over Bitcoin ownership or compensation. It offers a reference for how courts may handle similar cases, especially in claims involving the return or valuation of cryptocurrencies.
However, it is essential to understand the limits:
- Bitcoin is not legal tender.
- Trading platforms and exchange services operating in China are still illegal.
- Activities such as Bitcoin mining remain restricted.
For those involved in private transactions or holding Bitcoin, the ruling reinforces the idea that ownership rights might be defended in court under property law—but only within specific contexts.
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Frequently Asked Questions
Q: Does the Shanghai High Court’s decision make Bitcoin legal in China?
A: No. The recognition of Bitcoin as virtual property applies only to certain civil cases. It does not change the fact that trading, issuing, or conducting business with Bitcoin is largely prohibited.
Q: Can I sue someone in China for not returning my Bitcoin?
A: Yes, based on this case, courts may support claims for the return of Bitcoin or compensation for its value, treating it as property.
Q: Is it safe to invest in Bitcoin in China?
A: While owning Bitcoin isn’t explicitly illegal, public trading, exchange services, and fundraising using cryptocurrencies are illegal. Investors should be aware of significant legal and financial risks.
Q: How do Chinese courts value Bitcoin in compensation cases?
A: As seen in this case, courts may use the original purchase price or a mutually agreed-upon value between parties. There’s no standardized method yet.
Q: Will other Chinese courts follow this decision?
A: It is likely that other courts will reference this case, especially in similar civil disputes. However, criminal cases involving illegal fundraising or trading will still be judged under stricter regulations.
Q: What is the difference between ‘virtual commodity’ and ‘virtual property’?
A: “Virtual commodity” is an economic term used by regulators, while “virtual property” is a legal concept that helps courts apply existing property laws in disputes.
Conclusion
The Shanghai High Court’s classification of Bitcoin as virtual property is a step toward clarifying its status in civil law. However, it is crucial to distinguish between civil property protection and the broader legality of cryptocurrency activities.
China maintains strict regulations against cryptocurrency trading and financial activities. This ruling does not change that. For those dealing with Bitcoin, understanding these legal boundaries is essential to avoid unintended violations.
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