China’s regulatory stance on cryptocurrencies continues to evolve with the release of new guidelines by the Supreme Court regarding cryptocurrency-related disputes. According to the ruling, settling a debt using a small amount of digital assets would be considered legal if both parties agree.
The court recognized that in this scenario, cryptocurrencies have network virtual properties but emphasized that this approach would only be permitted if there were no other valid reasons against it. However, if one party agrees to transfer cryptocurrencies to another, but the receiving party cannot fulfill their end of the deal due to policy restrictions, the court will determine the compensation based on the actual value of the property accepted by the receiving party at the time of signing the contract.
“If it is agreed between the parties that a small amount of virtual currency shall be used to compensate the debts arising from a mutual exchange, labor service, and other basic relations, if there are no other invalid causes, the people’s court shall recognize the contract as valid,”
the court ruled.
Crypto Adoption in China
China’s stance on cryptocurrencies has been somewhat contradictory in recent times, with a blanket ban in place but also with some flexibility in the interpretation and enforcement of the rules. The latest guidelines from the Supreme Court regarding cryptocurrency-related disputes show that China is continuing to evolve its regulation of the digital asset sector. The fact that settling a debt using a small amount of digital assets would be considered legal if both parties agree is a positive development for cryptocurrency investors.
The Beijing Number One Intermediate People’s Court’s ruling in 2022 that citizens could still trade cryptocurrencies as virtual assets, but not use them as a currency, was also a significant step forward for the industry in China. It is still unclear if the government now recognizes the legal status of digital assets, but the fact that it is acknowledging the growing interest in digital assets is a positive sign for investors.
It is important to note that China has implemented a 20% personal income tax on investment profits for individual cryptocurrency investors and Bitcoin miners. This move is a clear indication that the government is taking steps to regulate the industry, and it may also suggest that the government sees digital assets as legitimate investment assets. As such, investors in China must stay abreast of any changes in regulations and guidelines to ensure they are compliant and can make informed investment decisions.
