A Chinese court has ruled that citizens may trade cryptocurrencies but not use them as a substitute for money.
Beijing Court Approves Crypto Trading as a Virtual Asset
Despite China’s ban on digital asset services, a Chinese court has ruled that citizens may continue to trade cryptocurrencies. Notably, China has an existing ban on trading cryptocurrencies, claiming a threat to the financial sector’s stability.
According to the Beijing Number One Intermediate People’s Court, interested investors can only trade cryptocurrencies, which should be recognized as virtual assets rather than currency.
The decision was made in a court case involving a crypto loan in Litecoin (LTC) with the promise of interest payments in digital currencies. According to the facts of the case, Zhai Wenjie lent his friend Ding Hao 50,000 Litecoin in 2015. According to Zhai Wenjie, Ding Hao agreed to pay 1,000 Litecoins in interest every month, which the defendant denied.
Litecoin’s Status as a Currency
Despite acknowledging China’s existing ban on cryptocurrency trade, the presiding judge stated that Litecoin could not be considered a currency. According to the court, the cryptocurrency is not issued by a monetary body and lacks legal and financial backing.
“According to real administrative regulations and cases, our country only denies the monetary attributes of virtual currency and prohibits its circulation as currency, but the virtual currency itself is a virtual property protected by the law,” the court ruled.
Intriguingly, the court recognized Litecoin despite the current ban on Bitcoin (BTC), noting that the country has regulations surrounding such assets.
The judge in the case emphasized a lack of laws that forbid the perception of Litecoin as an illegal asset. As a result, the judge decided in favor of the plaintiff, finding that the defendant had borrowed cryptocurrency and ordering him to return Litecoin.
China’s Stance on Crypto
The judgment is similar to a recent decision by a Chaoyang-based court, which told firms not to pay salaries in Tether (USDT) due to the ban on the exchange of digital assets.
It is worth mentioning that different Chinese regional courts have issued varying judgments on digital asset trade and handling. For example, according to reports in May, the Shanghai High People’s Court determined that Bitcoin had a “certain economic value” and is thus protected by Chinese law.
Despite the ban on crypto services, recent data shows that more Chinese residents are still trading in various assets. According to reports, China now ranks tenth in the world in terms of cryptocurrency adoption.
However, the idea of cryptocurrencies as assets analogous to securities is gaining traction in other parts of the world. India, for instance, has taken the stance that cryptocurrencies are poor exchange mediums but that investors should not be barred from trading them.
Singapore has taken a similar attitude, but with dire warnings that price volatility makes cryptocurrencies such a recklessly high-risk investment, the island nation may legislate to require government authorization before retail investors take the leap.