Despite Ban, Chinese Court Rules People Can Trade Cryptos — But There's A Catch

Zinger Key Points
  • Chinese court rules in favor of trading cryptos.
  • The judge said cryptos are not regulated, and therefore cannot be used as a form of payment.

Despite China’s ban on digital asset services, a Chinese court has ruled that its people may continue to trade cryptocurrencies.

Notably, China already banned cryptocurrency trading, claiming a risk to the stability of the financial system.

According to a ruling of the Beijing Number One Intermediate People's Court, interested investors may only trade cryptocurrencies, which should be regarded as virtual assets rather than as a form of legal currency.

The decision was reached in a case involving a Litecoin LTC/USD loan with the promise of receiving interest payments in other digital currencies.

According to the case specifics, Zhai Wenjie lent his friend Zhai Wenjie 50,000 Litecoin in 2015.

Hao denied Wenjie's claim that he pledged to pay 1,000 Litecoins in interest each month.

Currency Status For Litecoin

The court acknowledged the current restriction on cryptocurrency trading in China, but the presiding judge pointed out that Litecoin could not be regarded as a form of payment.

The cryptocurrency lacks support from regulatory and financial structures, the judge stated and noted the digital assets are not issued by a monetary authority.

“According to real administrative regulations and cases, our country only denies the monetary attributes of virtual currency and prohibits its circulation as currency, but the virtual currency itself is a virtual property protected by the law,” the court ruled.

Notably, the court took into consideration Litecoin despite the country's rules controlling such assets and the current prohibition on Bitcoin BTC/USD.

The judge emphasized a lack of rules characterizing Litecoin as an illegal asset.

The judge ordered the defendant to return Litecoin after finding that the complainant had provided evidence indicating the defendant had borrowed a cryptocurrency.

Chinese Policy Regarding Cryptos

The judgment is similar to one made recently by a Chaoyang-based court, which instructed businesses not to pay wages in Tether USDT/USD because of the restriction on the transfer of digital assets.

It is important to note that several Chinese regional courts have rendered varying rulings on the handling and trade of digital assets.

For instance, the Shanghai High People's Court determined that Bitcoin had a "certain economic worth" and is protected by national law.

Despite the Chinese government’s crackdown on cryptocurrency activity, which includes a ban on all cryptocurrency trading announced in September 2021, the country is especially strong in the usage of centralized services, placing second overall for purchasing power-adjusted transaction volume at both the overall and retail levels, according to recent statistics.

Are you ready for the next crypto bull run? Be prepared before it happens! Hear from industry thought leaders like Kevin O’Leary and Anthony Scaramucci at the 2022 Benzinga Crypto Conference on Dec. 7 in New York City.

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Posted In: AsiaCryptocurrencyNewsLegalMarketsChinaEurasia
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