Lawyer points to legality of owning cryptocurrencies in China

Despite crackdowns on the crypto industry, Chinese authorities have not banned ownership of digital assets. This was stated by David Lesperança, founder of Lesperance & Associates, in an interview Cointelegraph.

He noted that crypto exchanges remain banned in the country. However, Chinese authorities recognise digital currencies as virtual property protected by law.

The lawyer cited a recent court ruling regarding a loan issued in Litecoin (LTC). The defendant Din Hao could not fully repay the 50,000 LTC borrowed from Zhai Wenze in 2015.

The case became the largest precedent in China concerning cryptocurrencies. Over seven years, Litecoin’s price has risen by about 1,800% from around $3 (CoinGecko).

On August 31, the Beijing Intermediate Court ruled that the defendant still owes the plaintiff the amount in cryptocurrency. It rejected Din Hao’s arguments that the People’s Bank of China had officially banned crypto transactions in 2021.

“The court confirmed that cryptocurrencies, including Litecoin, are property, even if they exist in a virtual realm,” said Lesperança.

According to him, the community should not draw any particular positive conclusions from the precedent. The case became a routine dispute over a commercial loan and was settled in accordance with property-law norms, the lawyer added.

“To date, owning cryptocurrencies in China is not prohibited. … But this does not make commercial trading of such property legal, as the government specifically banned crypto exchanges.”

An anonymous source from the Chinese crypto industry did not agree with Lesperança’s view. He said that the central bank has never explicitly banned individuals from trading digital assets, though it would like to.

The interlocutor confirmed that many users in China faced blocks on bank cards used for over-the-counter trading of cryptocurrencies. He said financial institutions acted on their own initiative, deeming all activity related to virtual assets illegal.

In December 2021, Chinese media reported that despite tightening regulation and the departure of major platforms, local investors did not abandon cryptocurrencies.

According to the Cambridge Centre for Alternative Finance, in January China returned to second place in the ranking of countries by the share of Bitcoin hashrate, behind only the United States. The figure of 21.1% matched the expert assessment of the remaining mining capacity in the country at the end of 2021.

In May, the Shanghai High Court classified digital gold as a virtual asset with economic value, protected by law.

In 2019, a similar status was granted Bitcoin status by the Hangzhou court.

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