In a landmark clarification, The People's Court Daily has affirmed that virtual currency qualifies as legitimate property under Chinese law. The article, titled "Recognition of Virtual Currency as Property and the Handling of Assets in Criminal Cases," provides critical legal insights into how digital assets should be treated in judicial proceedings—particularly in cases involving theft, fraud, or illegal acquisition.
This authoritative analysis emphasizes that despite regulatory restrictions on trading and financial activities involving cryptocurrencies, virtual currency itself is not classified as an illegal item. As such, it retains its status as a legally protected asset when held by individuals, provided it was obtained through lawful means.
Virtual Currency: A Recognizable Form of Digital Property
The core argument centers on the economic attributes of virtual currency. Unlike purely abstract data or contraband like drugs, virtual currencies such as Bitcoin and stablecoins like USDT possess real-world value through their use in exchanges, settlements, and even cross-border transactions.
Why Virtual Currency Qualifies as Property
Functional Utility in Blockchain Systems
Virtual currencies are essential within decentralized networks. For example:- They serve as settlement coins (DVP) in blockchain-based securities clearing.
- They act as digital tickets, voting tokens, or in-game assets, secured by immutable ledger technology.
While these tokens cannot function as legal tender in China, their utility does not vanish—it simply shifts from monetary to digital asset use.
Objective Exchange Value Exists Globally
Despite China’s ban on domestic cryptocurrency trading platforms, the global market continues to recognize and price digital assets. Stablecoins tied to fiat currencies maintain consistent valuation, enabling seamless international transfers.Over 73 countries now host nearly 30,000 crypto ATMs, reflecting widespread acceptance. This external legitimacy ensures that virtual currencies carry measurable economic worth—even if they’re not officially recognized within mainland China.
Crimes Targeting Virtual Currency Should Be Treated as Property Crimes
Stealing or defrauding someone of their crypto holdings directly infringes upon property rights. The article argues that treating such acts solely under computer crime statutes (e.g., illegal intrusion into information systems) fails to address the true nature of the offense: theft of valuable assets.By analogy, even illegal items like drugs can be subject to theft charges because the law protects possession. Applying this logic, virtual currency—being far more economically valid—should unquestionably fall under property crime frameworks.
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Legal Framework Supports Asset Protection
Contrary to popular belief, no current Chinese regulation declares virtual currency itself illegal. Key policy documents support this interpretation:
1. The 2013 Five-Department Notice
Issued by the People’s Bank of China and other regulators, it explicitly states:
“Bitcoin is a specific type of virtual commodity… not equivalent to legal tender.”
This classification places Bitcoin and similar tokens in the same category as other intangible digital goods—subject to civil law protections.
2. The 2021 Ten-Department Notice
While banning certain financial activities (like crypto exchanges and ICOs), it stops short of outlawing all personal transactions. The notice targets organized business operations, not one-off peer-to-peer trades.
For instance, selling crypto once to help a family member doesn’t constitute a “business activity” and thus falls outside the scope of prohibition.
3. Civil Court Precedents Confirm Property Status
An analysis of 16 recent civil judgments reveals a consistent trend: while contracts for crypto mining or investment may be voided for violating public order, the assets themselves are not confiscated.
Notably, in Supreme People’s Court Case (2022) Zui Gao Fa Zhi Min Zhong No. 1581, a software development contract aimed at acquiring crypto was ruled invalid—but the court still ordered repayment of 100,000 RMB, rejecting any notion of forfeiture.
This aligns with the principle that holding an asset isn’t illegal just because some uses of it might be restricted—similar to owning a car that could be used for unauthorized transport.
How Should Courts Handle Confiscated Crypto?
One of the most practical takeaways is that not all seized virtual currency should be automatically forfeited or returned. Instead, courts must balance individual rights with social interests.
Case 1: Victim Had No Trading Intent (Pure Theft)
If someone’s wallet is hacked or their private key stolen:
- The victim committed no wrongdoing.
- The stolen crypto should be returned or compensated.
- If already sold, compensation can be based on purchase price, recent market rates, or sale proceeds.
- In absence of verifiable pricing (due to lack of domestic exchanges), value may be excluded from sentencing calculations—but the crime remains punishable.
Case 2: Victim Engaged in Risky Transactions
When victims were actively trading—especially repeatedly or without clear source verification—their own conduct carries some fault.
- If evidence shows intent to circumvent regulations or engage in illicit finance: forfeit all recovered assets.
- Otherwise: partial restitution may apply, with remaining gains seized by the state.
- Recovered virtual currency can be sold via international legal channels, with proceeds going to the national treasury.
This nuanced approach ensures fairness while discouraging speculative or underground trading behavior.
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Frequently Asked Questions (FAQ)
Q: Is owning cryptocurrency legal in China?
A: Yes. While financial activities like trading and mining are restricted, simply holding virtual currency is not illegal. It is recognized as a form of virtual property protected under civil law.
Q: Can I sue someone who stole my crypto?
A: Yes. Theft of virtual currency constitutes a property crime. You can seek criminal prosecution and civil compensation, especially if you can prove ownership and loss.
Q: Will stolen crypto always be returned if recovered?
A: Not necessarily. If you were engaged in frequent or illicit trading, courts may rule you bear partial responsibility and deny full restitution.
Q: Are stablecoins like USDT treated differently?
A: No. Under current guidance, USDT and similar tokens are viewed the same as other virtual commodities—valuable but non-legal-tender assets.
Q: Can authorities confiscate my crypto wallet?
A: Only if it's linked to criminal activity or derived from illegal sources. Mere possession does not justify seizure.
Q: What happens to confiscated crypto?
A: Authorities may sell it through authorized international mechanisms and deposit proceeds into the state treasury.
Conclusion: A Balanced Path Forward
China’s judicial system is drawing a crucial distinction between the asset and its misuse. Virtual currency, due to its inherent economic value and technological utility, qualifies as legitimate property under existing laws.
While regulatory caution remains—especially around systemic financial risks—the door is open for fair treatment in criminal and civil cases. This creates a more predictable environment for holders and strengthens enforcement capabilities in fighting crypto-related crimes.
As digital assets evolve, so too must legal frameworks. This ruling marks a significant step toward integrating innovation with rule-of-law principles—ensuring justice without stifling progress.
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