A recent ruling by the Songjiang District People’s Court in Shanghai has highlighted the complex legal landscape surrounding virtual currencies in China. While affirming that virtual currencies possess property attributes akin to virtual commodities, the court underscored the illegality of business activities related to their issuance and trading. This decision follows a case involving an agricultural development company (Company X) that contracted with an investment management company (Company S) to issue its own virtual currency for fundraising purposes.
The case, a service contract dispute, stemmed from a 2017 agreement between the two companies. Attracted by the explosive growth of Bitcoin and Ethereum, Company X sought to capitalize on the trend by creating its own token. Company S agreed to provide services, including drafting a “white paper” and facilitating the token issuance using blockchain technology, for a fee of RMB 300,000.
The Shanghai High Court, referencing the Songjiang District Court’s decision, reiterated that while virtual currency is not prohibited as a virtual commodity with property attributes, related business activities remain strictly restricted under Chinese law. The court emphasized the ongoing crackdown on virtual currency trading and speculation.
