Is Virtual Currency Considered Legal Property in China?

·

Virtual currencies, particularly Bitcoin, have seen dramatic price fluctuations in 2024—surging past $73,000 before sharply declining. Despite China’s strict regulatory stance, public interest in cryptocurrency investment remains strong, leading to a growing number of civil and commercial disputes involving digital assets. This article explores whether virtual currencies are recognized as legal property under Chinese law, analyzes judicial trends in related civil cases, and examines the challenges and potential paths for legal recourse.

The term "virtual currency" here refers to decentralized blockchain-based assets such as Bitcoin (BTC), Ethereum (ETH), and Tether (USDT).

Is Virtual Currency Recognized as Legal Property in China?

There is ongoing debate about the legal nature of virtual currencies. Some argue they lack the characteristics of traditional property and should not be protected under civil law. Others—including this author—believe virtual currencies possess key attributes of property and deserve legal protection. The following points support this view:

1. No Explicit Legal Denial of Property Status

Since 2013, China has issued several regulatory documents targeting virtual currencies, including:

While these policies reflect tightening controls, none explicitly declare virtual currencies illegal or deny their property attributes. In fact, the 2021 notice states that civil acts involving virtual currency investments are invalid only if they violate public order and good customs—implying that such investments are not inherently unlawful.

👉 Discover how global regulations are shaping the future of digital assets.

2. Judicial Recognition of Virtual Currency as Property

Chinese courts have increasingly acknowledged the property-like nature of cryptocurrencies.

In Li v. Yan (2019), the Shanghai First Intermediate People’s Court ruled that Bitcoin exhibits key characteristics of property—value, scarcity, and controllability—and qualifies as a virtual asset. The court noted that while central bank regulations deny Bitcoin’s status as legal tender, they do not negate its nature as a "virtual commodity", a term used in the 2013 central bank notice.

Similarly, in a theft case involving Bitcoin (Li v. Jiangxi), the court held that even if an asset is heavily regulated, it can still be the subject of property crimes. This reasoning supports the view that virtual currencies are legally cognizable assets.

3. Criminal Prosecutions Confirm Property Status

Numerous criminal cases have treated the unauthorized acquisition of Bitcoin or Ethereum as theft, reinforcing their status as property.

For example, courts in Jiangxi and Shanghai have convicted individuals of stealing cryptocurrency via hacking or fraud. These rulings implicitly accept that digital assets can be owned, controlled, and unlawfully taken—core elements of property rights.

Civil Dispute Resolution: Key Judicial Trends

Most legal disputes involving virtual currencies are civil in nature—especially contract disputes. However, judicial approaches vary significantly by region and case type.

Virtual Currency Lending Agreements

Some Courts Reject Enforcement

Several courts refuse to enforce lending contracts denominated in virtual currency, citing regulatory prohibitions.

In Xu v. Lin (Jiangsu), the court ruled that borrowing Bitcoin violates public policy because virtual currencies cannot legally circulate as money. It further held that Bitcoin lacks fungibility and cannot be valued in fiat terms, making return claims unenforceable.

Similarly, in Xue v. Jiang (Shenzhen), the court dismissed a claim involving a loan paid in USDT, stating such transactions disturb financial order and are therefore invalid.

Other Courts Recognize Validity

In contrast, Beijing courts have taken a more pragmatic approach.

In Chang v. Xiong, the Beijing Haidian District Court upheld a loan contract where 500 ETH were transferred as repayment. The court reasoned that while Ethereum isn't classified as a "thing" under property law, it represents a protected civil interest under contract law and can be lawfully held.

Another case, Ding v. Zhai, affirmed that Litecoin is a form of virtual property protected by law. The court ordered the defendant to return 33,000 LTC or face liability for damages—an indication that possession and return obligations may be enforceable.

👉 See how investors are navigating cross-border crypto regulations today.

Mining Equipment Sales Contracts

Contracts for purchasing mining hardware ("mining machines") are often deemed invalid due to environmental and policy concerns.

In Sichuan Co. v. Guangzhou Co., the Guangzhou Intermediate Court invalidated a mining equipment sale, citing national goals for carbon reduction and energy conservation. It ruled the transaction promoted illegal "mining" activities and thus violated public interest.

A similar ruling in Hu v. Wang (Sichuan) emphasized that mining consumes excessive energy and poses financial risks—making such contracts void ab initio.

Crypto Investment & Management Agreements

Contracts involving crypto-based investment management are frequently invalidated for violating financial regulations.

In Wei v. Zhang, Guangzhou Internet Court dismissed claims over lost XIN coins, stating that foreign-based crypto investments threaten public financial safety and contravene public order.

In Chen v. Ma, a Guangzhou court invalidated a profit-sharing agreement involving virtual currency trading, calling it an illegal financial activity that undermines regulatory authority.

Development of Crypto Platforms

Interestingly, software development for crypto platforms may still be lawful—even if their use is restricted.

In a landmark ruling (Jiangxi Co. v. Shenzhen Co.), the Supreme People’s Court distinguished between developing a crypto trading platform and operating one. It held that development itself is not illegal, as long as it doesn't involve actual trading or financing services banned under regulations.

This precedent suggests tech innovation in blockchain may still find legal space—even in a restrictive environment.

Legal Remedies: Challenges and Opportunities

Despite growing recognition of crypto assets as property, obtaining judicial relief remains difficult.

1. Returning Virtual Currency Is Problematic

Many courts refuse to order the return of specific coins, arguing they lack fungibility and tangibility. Even when ordered, enforcement is hard—without access to private keys, authorities cannot seize or transfer digital assets.

2. Compensation in Fiat Currency Is Often Rejected

In China’s first overturned Bitcoin arbitration (Gao v. Li), Shenzhen courts canceled an award requiring compensation in USD equivalent to Bitcoin value. The ruling stated this would undermine state monetary policy by enabling crypto-fiat conversion—a violation of public interest.

This stance was later affirmed by the Supreme Court as Guiding Case No. 199.

3. Pre-Agreed Valuation May Enable Relief

However, there is a workaround: pre-agreed pricing.

In Yan v. Li, parties agreed that each Bitcoin would be valued at ¥42,206.75 if return was impossible. The Shanghai court accepted this standard and awarded compensation accordingly—showing that mutually agreed valuations may survive judicial scrutiny.

👉 Learn how smart contracts are changing dispute resolution in digital finance.

Could EU’s MiCA Influence China’s Approach?

The EU’s Markets in Crypto-Assets (MiCA) regulation, expected to take full effect in 2024, aims to create a unified legal framework for crypto assets across Europe. By licensing stablecoins like USDT and USDC and regulating exchanges transparently, MiCA could enhance investor protection and market integrity.

If MiCA proves successful in curbing illicit finance while fostering innovation, it may indirectly pressure China to reconsider its rigid stance—especially regarding cross-border transactions, asset valuation, and contract enforcement.

While China is unlikely to adopt similar liberalization soon, international regulatory alignment could gradually shift judicial attitudes toward recognizing virtual currencies as enforceable assets in civil disputes.

Frequently Asked Questions (FAQ)

Q: Can I legally own Bitcoin in China?
A: Yes. While trading and financial services involving crypto are banned, private ownership is not explicitly illegal. Individuals may hold crypto in personal wallets without violating current laws.

Q: Are crypto-related contracts enforceable in Chinese courts?
A: It depends. Contracts tied to mining or speculative trading are often voided for violating public policy. However, lending or borrowing agreements with clear terms may be upheld—especially if both parties accept the arrangement.

Q: Can I sue someone for stealing my cryptocurrency?
A: Yes—and some courts have recognized such acts as theft. However, recovery depends on evidence of ownership and control (e.g., wallet addresses, transaction logs).

Q: Will I get compensated if my crypto is lost or stolen?
A: Direct return is rare due to technical barriers. But if both parties agree on a fiat value beforehand, courts may award monetary damages based on that amount.

Q: Does China recognize crypto as property for inheritance purposes?
A: There is no explicit law, but some scholars argue digital assets can be inherited under general civil principles—especially if access details are documented.

Q: How might global regulations affect China’s crypto policies?
A: As major economies like the EU regulate crypto through frameworks like MiCA, China may face increasing pressure to clarify its own rules—potentially allowing more predictable enforcement in civil disputes.

Core Keywords:

This analysis reflects evolving judicial thinking amid strict regulatory constraints—highlighting both the risks and cautious openings for legal protection of digital assets in China.