Despite enforcing a major cryptocurrency ban one year ago, the Chinese government still protects local crypto investors as crypto is recognized as virtual property protected by the law.
One of the world’s most hostile countries toward Bitcoin (BTC), China has not yet banned the possession of cryptocurrencies, according to David Lesperance, founder of Lesperance & Associates law firm.
Crypto holders in China are protected by the law in case of theft, misappropriation or breach of a loan agreement, Lesperance said. He emphasized that crypto exchanges are still banned in China.
The lawyer referred to a recent Chinese court case involving a breach of a loan made in the Litecoin (LTC) cryptocurrency. Defendant Ding Hao failed to fully pay back all 50,000 LTC that he borrowed from Zhai Wenjie in 2015, which became a major court precedent involving cryptocurrency in China.
Since 2015, the price of Litecoin has jumped roughly 1,800%, as the cryptocurrency was trading at around $3 seven years ago, according to data from CoinGecko.
On Aug. 31, the Beijing No. 1 Intermediate Court ruled that the defendant owed Zhai the remaining amount of Litecoin, rejecting Ding’s argument that the People’s Bank of China (PBoC) officially banned crypto transactions last year.
“The court has upheld that cryptocurrencies like Litecoin are ‘property’ even though they are created in the virtual realm,” Lesperance said. He emphasized that the crypto community “shouldn’t draw any particular positive inferences” from the case as it was a “very ordinary” commercial loan dispute that was settled under normal property law rules, stating:
“To date, possession of crypto in China has not been banned. [...] It does not make the commercial trading of this type of property legal, as the government has specifically banned crypto exchanges in China.”
While Lesperance says that crypto exchanges are banned in China, some local crypto enthusiasts are confident that the PBoC has never explicitly banned individuals from trading cryptocurrencies.
“It’s true that China doesn't want individuals to trade crypto. But this is never being written in any formal document,” a person linked to the crypto industry in China said.
According to the source, many mainland users see their bank cards frozen if they use them for crypto over-the-counter (OTC) transactions. However, trusted OTC channels still allow crypto transactions in China.
“So even though trading crypto is not illegal, we don't want to waste our time arguing with banks because obviously, they think everything about crypto is illegal,” the person said.
The latest news brings yet another piece of evidence that crypto has not been totally suppressed in China since the government announced a coordinated crackdown on crypto in September 2021. As previously reported, China returned its position as the second-largest Bitcoin hash rate provider as of January 2022.