The rapid advancement of network communication and fintech, particularly the application of blockchain technology, has catalyzed a transformation in monetary forms—ushering in the era of digital currency. As a product of the digital economy and digital finance, digital currency generally refers to value represented in electronic data. Though not a strictly defined legal concept, it encompasses various forms such as electronic money, virtual currency, and cryptocurrencies like Tencent’s Q币 (Q-coins), Bitcoin, and China’s central bank digital currency (CBDC), known as digital RMB.
Given the lack of conceptual clarity, academic discourse often conflates these forms. A typological distinction is essential: digital currencies can be categorized into non-sovereign (privately issued) and sovereign (state-issued) types. Non-sovereign digital currencies further divide into those based on blockchain technology (e.g., Bitcoin) and those that are not (e.g., Q币). Sovereign digital currencies, such as digital RMB, are issued by central banks and possess legal tender status.
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This article explores the operational mechanisms of different digital currencies and analyzes their evolving legal status across civil and criminal law frameworks, focusing on data rights, property recognition, and regulatory responses.
Understanding Traditional Non-Blockchain Digital Currencies
Technical Features and Regulatory Implications
Early forms of digital currency—such as game tokens, prepaid cards, or campus IDs—are centralized electronic value units. These systems rely on a central issuer (e.g., Tencent for Q币) and a centralized ledger. Users purchase these tokens with fiat money to access specific services within closed ecosystems. For instance, Q币 cannot be used outside Tencent’s platform nor exchanged back into legal tender.
Regulatory definitions reflect this limitation. According to China’s 2009 Notice on Strengthening the Management of Online Game Virtual Currency (issued by the Ministry of Culture and Commerce), virtual currency must be confined to the issuer’s ecosystem and cannot serve as payment for real-world goods or third-party services. This restriction removes such tokens from financial regulation since they lack convertibility—a core attribute of monetary function.
As such, these non-blockchain digital currencies do not fulfill the standard roles of money: medium of exchange, store of value, or unit of account—outside their proprietary environments. Consequently, they fall outside the scope of financial supervision.
Civil Law Perspective: Data Rights vs. Property Rights
Under China’s Civil Code, Article 127 acknowledges the protection of data and virtual property but offers no definitive classification. It serves more as a placeholder than a substantive legal framework.
Scholars debate whether tokens like Q币 constitute property. Some argue for a “bundle of rights” model due to the multi-party nature of data governance. Others advocate for treating data files as objects of absolute ownership. However, these models struggle to apply to virtual currencies because the value of Q币 stems not from the data itself but from the issuer’s promise.
In practice, users hold a contractual claim against the issuer. When a user purchases Q币, they enter into a service agreement. If the company terminates operations, it must refund unused balances—a clear contractual obligation. Similarly, if a user cheats or violates terms, the issuer may reset accounts, reflecting its authority under contract law.
Thus, from a civil perspective, traditional digital currencies represent personal rights (claims) rather than real rights (ownership). Their enforceability depends entirely on the issuer’s cooperation.
Criminal Law Debate: Is Virtual Currency "Property"?
In criminal jurisprudence, the key question is whether digital tokens qualify as “property” under theft or fraud statutes.
Historically, Chinese courts recognized Q币 as virtual property with economic value. In the Meng Dong and He Likang theft case, the court ruled that stealing game currency constituted theft due to its market price and utility.
However, after the 2009 Criminal Law Amendment (VII) introduced illegal acquisition of computer system data as a distinct offense, judicial thinking shifted. The Supreme People’s Court later clarified that virtual property is fundamentally electronic data, not “public or private property” under Article 264 (theft). Thus, unauthorized access should be prosecuted under computer crime provisions.
Yet inconsistencies persist. In 2017, the Supreme People’s Procuratorate issued a guidance case (Zhang Simao Domain Name Theft Case) affirming that domain names—also digital data—can be stolen, implying property status.
This contradiction reveals deeper issues:
- Computer crimes protect public order, not individual property.
- Many attacks (e.g., phishing) don’t involve system intrusion but still cause financial loss.
- Penalties for computer crimes are typically lighter than for theft.
A growing consensus holds that if an asset has value, transferability, and controllability, it should be treated as property regardless of form. While some resist conceptual expansions of “possession” to intangible assets, modern economies increasingly depend on digital control mechanisms.
Ultimately, equating all virtual theft with data breaches fails to reflect reality. A balanced approach—recognizing property status while tailoring penalties—is needed.
Blockchain-Based Cryptocurrencies: Decentralization and Legal Challenges
The Rise of Decentralized Architecture
Bitcoin, introduced in 2008 by Satoshi Nakamoto, marked a paradigm shift. Unlike centralized systems, blockchain-based cryptocurrencies operate via decentralized ledgers, asymmetric encryption, and consensus algorithms.
Key features include:
- Peer-to-peer transactions: No intermediaries required.
- Distributed validation: All nodes verify transactions.
- Immutable records: Blocks are cryptographically linked and tamper-resistant.
- Mining-based issuance: New coins are minted through computational work.
Ownership is proven through private keys—mathematical credentials that enable spending. There is no issuer or custodian; value arises from network consensus.
Stablecoins like USDT or DAI attempt to address Bitcoin’s volatility by pegging value to fiat or other assets. While some are asset-backed (e.g., 1:1 USD reserves), others use algorithmic mechanisms (e.g., TerraUSD). However, even stablecoins face risks—as seen in the 2022 collapse of UST and Luna—which revealed fragility in algorithmic designs.
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Financial Regulation: Are Cryptocurrencies Money?
Despite being called “digital money,” cryptocurrencies like Bitcoin fail key monetary functions:
- Unit of account: Prices fluctuate too wildly.
- Store of value: High volatility discourages long-term holding.
- Medium of exchange: Slow transaction speeds and high fees limit usability.
Instead, Bitcoin behaves more like a speculative asset traded on exchanges. Its value derives from market sentiment and perceived scarcity—not intrinsic worth or state backing.
Globally, regulatory attitudes vary. Japan and Germany recognize Bitcoin as legal payment; China bans all cryptocurrency transactions and mining activities.
In 2021, the People’s Bank of China declared crypto-related activities illegal financial acts. While individuals may hold cryptocurrencies, trading them violates public order and social morals under PBOC guidance (Yinfa [2021] No. 237).
Nonetheless, regulators acknowledge their economic value. The FATF treats crypto as money for anti-money laundering purposes—not because it is money legally, but because it functions like money in illicit flows.
Legal Status: Clarifying Property Rights in Law
Civil Law Recognition
Despite regulatory bans on trading, Chinese courts have inconsistently ruled on crypto ownership:
- Some cases recognize Bitcoin as a virtual commodity with value.
- Others void contracts involving crypto trades as illegal.
- In Guiding Case No. 199 (Gao Zheyu v. Yunsilu Fund), an arbitral award compensating in USD equivalent to Bitcoin was overturned for enabling de facto RMB-crypto exchange—violating financial regulations.
Still, courts increasingly accept that crypto meets core criteria for property:
- Scarcity: Limited supply via algorithm.
- Value: Acquired through labor (mining) or capital.
- Control: Private keys enable exclusive access.
Unlike Q币, there's no counterparty—no issuer to sue or redeem from. Hence, Bitcoin represents an absolute right, not a relative claim.
Therefore, while not legal tender, it should be recognized as virtual property under civil law.
Criminal Law Treatment
Criminal rulings remain fragmented:
- Some treat crypto theft as data crime (illegal access).
- Others apply theft or robbery when force or deception is used.
- In the Yan et al. Illegal Detention Case, perpetrators forced victims to transfer Bitcoin; they were charged with illegal detention—not robbery—suggesting judges hesitate to classify crypto as property.
However, logical consistency demands recognition:
- If Bitcoin has value and can be controlled/possessed,
- And if taking it causes economic harm,
Then depriving someone of it fits the structure of theft—breaking possession and establishing new control.
Even without physical form, modern law must adapt to digital possession. Refusing to do so undermines justice in an increasingly digitized world.
Moreover, even prohibited items (like drugs) can be stolen under Chinese law (per 2013 judicial interpretation). Legality of possession doesn’t negate property status.
Thus, theft of cryptocurrency should qualify as property crime, especially when private keys are stolen or transferred without consent.
Frequently Asked Questions (FAQ)
Q: Is Bitcoin legal tender in China?
A: No. The People’s Bank of China explicitly prohibits Bitcoin from being used as currency. It lacks legal tender status and cannot circulate freely.
Q: Can I own cryptocurrency in China?
A: While individuals are not banned from holding crypto privately, engaging in transactions or trading is considered illegal under current financial regulations.
Q: Is stealing cryptocurrency a crime?
A: Yes. Even without full legal clarity, unauthorized access to digital wallets may constitute either computer system crimes or property crimes depending on jurisdiction and method used.
Q: Are stablecoins safer than Bitcoin?
A: Not necessarily. Asset-backed stablecoins carry counterparty risk; algorithmic ones rely on fragile economic models—as shown by UST’s collapse.
Q: Can I sue someone who stole my crypto?
A: Civil courts have recognized crypto as property in some cases, allowing recovery claims. However, enforcement remains challenging due to anonymity and cross-border issues.
Q: Does blockchain make cryptocurrencies untraceable?
A: While pseudonymous, most blockchains are public ledgers. With forensic tools, transactions can often be traced—especially when linked to exchanges requiring KYC.
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