The Songjiang District People’s Court in Shanghai ruled on November 19 on a service contract dispute centered on the legality of virtual currency issuance.
The case involved a contract between an agricultural development company and an investment management firm for token issuance and blockchain financing services.
Shanghai Court Sees Virtual Currency as Property in China: What Does this Mean for Crypto?
The Shanghai High Court has ruled that cryptocurrencies possess “property attributes” under Chinese law, granting them protection as commodities.
However, the court clarified that this protection does not extend to their use as currency or financial instruments.
The issue began in 2017 when the agricultural company, seeing the surge in Bitcoin and Ethereum prices, sought to raise funds by issuing its own cryptocurrency.
The company contracted an investment firm to create a white paper and facilitate the token issuance through blockchain technology, agreeing to pay RMB 300,000 in service fees under a “Blockchain Incubation Agreement.”
However, a year later, the tokens had not been issued, with the investment firm claiming the development of an app—outside the scope of their original agreement—was necessary for the issuance.
The agricultural company was dissatisfied with the delay and sued to terminate the contract and recover the payment.
The Shanghai High Court ruled that the contract was invalid because it involved illegal financial activities, specifically illegal public fundraising.
The court emphasized that issuing tokens to raise funds without official authorization constitutes an illegal financial operation, violating Chinese laws against securities issuance, financial fraud, and pyramid schemes.
Both parties were found to lack the legal qualifications to issue tokens, and their agreement violated financial regulations, disrupting economic order.
The court ordered the investment firm to return RMB 250,000 of the service fees, noting that both parties shared fault in entering into an illegal contract. The remaining claims were dismissed, and both parties accepted the ruling, which is now legally binding.
China’s Crypto Paradox: Recognizing Value But Tightening Control
Despite this strict position, the ruling acknowledged that crypto assets hold value as commodities and are not outright banned under Chinese law.
China’s crypto policies have long been among the most restrictive globally, with a sweeping ban on Bitcoin mining in 2021 and strict limitations on crypto trading. Yet, the country continues to explore blockchain technology and digital assets in other areas.
For instance, China supported using blockchain for cross-border payments at the recent BRICS Summit. The nation has also been actively deploying its central bank digital currency (CBDC), the digital yuan, in international trade agreements.
In contrast, Hong Kong has taken a more open approach, recently approving its first Bitcoin exchange-traded fund (ETF), giving mainland investors limited exposure to the asset.
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