- Judge Sun Jie ruled in the case of an agricultural development company and an investment management company
- Both companies were found to be violators and the virtual currencies were found to be virtual goods with proprietary attributes
The case started back in 2017 between an agricultural development company and an investment management company about issuing their own token has taken a new turn.
The People’s Court of Songjiang District in Shanghai and Judge Sun Jie recognized the activities of both companies as illegal but granted the claim of the agricultural development company against the investment management one for the return of funds for token issuance services.
This continues China’s ban on the issuance of digital assets from 2017, but actual ownership of cryptocurrencies remains unbanned.
More About the Background of the Case
In 2017, an agricultural development company signed a “Blockchain Incubation Agreement” with an investment management company. This document was to serve as a technical and legal guideline for the development of its own token, and the agricultural development company paid 300,000 yuan, or ~$44,400 at the time, for the work of issuance.
Whether the investment management company knew it initially or not, the ban on issuing its own virtual currency was already in effect and they first demanded that the agricultural development company release its own token application instead of WeChat.
The agricultural development company considered this a breach of contract and went to court, but Judge Sun Jie ruled that the activities of both parties were illegal under Chinese law. However, he still ordered the investment management company to return 250,000 yuan.
In addition, Judge Sun Jie made several comments that significantly clarify the situation of digital assets in China, which has long been a gray area for many:
“Although it is not illegal for individuals to simply hold virtual currency, commercial entities cannot participate in virtual currency investment transactions or even issue tokens on their own.”
She also added:
“Virtual currency trading speculation activities such as Bitcoin will not only disrupt the economic and financial order but also may become a payment and settlement tool for illegal and criminal activities, breeding money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities.”
Conclusion
China, albeit ambiguously, has been quite tough on digital assets, at least with regard to their free issuance and exchange.
This case is quite illustrative, and thus very important. Always consider the legal infrastructure within which you conduct your financial transactions and do not violate it.
