China’s Rulers Give Mixed Signals on Crypto’s Legal Status
In a surprising move, courts in China have ruled that cryptocurrencies are protected as legal property under Chinese law. This is despite an official ban on crypto trading and mining imposed in 2021.
The affirmation of cryptocurrencies’ legal status came in a new report from the People’s Court in China examining digital assets. The ruling legally recognizes digital assets in a country where there is no legal way of obtaining them.
China’s Crypto Rules Are More Than a Little Confusing
However, the change to China’s crypto laws is occurring as harsh punishments are being meted out to officials and crypto entrepreneurs on the mainland.
Most notably, a court sentenced a former Communist Party official to life in prison this week for taking bribes linked to supporting crypto mining operations. The contradictory approaches highlight the arbitrary flexing of Beijing’s muscle over digital assets and players in the field.
The People’s Court report found that cryptocurrencies have economic value and should therefore be considered legal property protected under Chinese law. Even though China’s Central Bank issued a nationwide ban on all cryptocurrency transactions in September 2021.
The country had previously banned all crypto mining in June of that year. However, China technically banned all crypto in June 2019 after its central bank blocked access to all cryptocurrency exchanges.
The People’s Court ruling suggests crypto holdings cannot be seized. Furthermore, that crimes involving digital assets should be handled differently from those involving traditional property.
Former Communist Party Official Jailed for Supporting Crypto Mining Firm
However, Beijing exhibited its uncompromising hostility to crypto again this week. Authorities handed down a life sentence to a former senior official in Jiangxi province. Police had charged him with taking bribes linked to illicit support for local crypto mining firms.
Xiao Yi allegedly helped companies hide mining activities and instructed them to pretend to be data analytics businesses during inspections.
The harsh punishment highlights Beijing’s ongoing crackdown on digital asset experiments. Even as courts argue cryptocurrencies themselves have a degree of legality.
Hong Kong recently began opening up to crypto exchanges, allowing them to apply for an official license. Source: Bloomberg.
Meanwhile, Hong Kong has broken from Beijing’s stern stance by approving licenses for crypto exchanges. The special administrative region, formerly a British colony, has long sought greater freedom. Many have speculated that Hong Kong is becoming a pilot zone for potential crypto policies on the mainland.
The thinking goes, if Hong Kong’s experiment goes well, the Communist Party may slowly introduce crypto itself. However, crypto’s defenders should not get too hopeful.
Many observers have noted that China’s ban on cryptocurrency is largely ineffective, with China still one of the largest markets for crypto on the planet.
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