• The Supreme Court of China has issued a statement about resolving debt disputes with cryptocurrencies.
• Crypto transactions and mining have been banned in China since 2021, but this ban is seen as more of a guideline than an enforceable law.
• A proposed law would not provide legal aid to residents who suffered financial losses during the crypto winter.
Supreme Court of China Provides Crypto Framework for Legal Disputes
The Supreme Court of China has released a statement allowing debts up to an unknown sum to be settled in cryptocurrencies if a contract requiring payment in such assets is in effect and no other local laws preempt the agreement. It should be noted that the cryptocurrency used to pay off the obligation is not considered legal cash, and will be null and void by Chinese courts if interpreted as such.
Crypto Transactions & Mining Banned In China
Since September 2021, crypto transactions and mining have been illegal in China. However, this prohibition has become more of a guideline than an enforceable law, as many citizens still hold cryptocurrencies despite being banned from using them as a medium of exchange. Taxation on digital assets has also been discussed among Chinese officials since its introduction.
Proposed Law Would Not Provide Financial Aid
A judgement decided in 2022 made it clear that individuals may legally hold cryptocurrencies even while they were banned from use as a medium of exchange. To further debate how Chinese courts should handle disputes involving cryptocurrency, it may be taxed as an asset under certain circumstances. Additionally, according to the proposed law, the Chinese government would not provide legal aid to residents who suffered financial losses during the crypto winter.
Continuous Attention On Asset Class
Prior to its complete prohibition of crypto trading in 2021, the Chinese government warned citizens about potential dangers associated with doing so – events which ultimately showed these warnings were valid. Despite being legally illegal in China, the country’s continuous attention on digital assets implies that this rule could potentially be repealed at some point in time down the line.
The Supreme Court’s decision provides clarity for those entering into contracts involving cryptocurrency payments and serves as protection against any potential losses incurred due to market volatility or other factors out of their control. Despite its current stance on digital assets being largely prohibitive, there is hope that over time attitudes towards cryptocurrency will become more relaxed within mainland China