Is it legal for domestic individuals to hold and trade virtual currencies?

Author: Jin Jianzhi, Source: Mankiw Blockchain Law

Is it legal for individuals to hold and trade virtual currencies in China? We can look at it from two aspects:

Regulatory level

Up to now, both the People’s Bank of China and other five ministries and commissions have issued the “Regulations on Preventing Bitcoin Risks”. Notice" (Yinfa [2013] No. 289) (hereinafter referred to as "No. 289"), and the "Announcement on Preventing Token Issuance Financing Risks" (hereinafter referred to as "Notice No. 289") issued by seven ministries and commissions including the People's Bank of China on September 4, 2017 94 Announcement"), or the "Notice on Further Preventing and Handling the Risks of Speculation in Virtual Currency Transactions" issued by the People's Bank of China and other ten ministries and commissions on September 24, 2021 (hereinafter referred to as the "924 Notice"),Although it was denied The legal currency attribute of virtual currency does not deny the property or commodity attribute of virtual currency.

Although the 924 notice further states that "any legal person, unincorporated organization and natural person who invests in virtual currencies and related derivatives violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them." ..”,Literally speaking, Notice 924 does not completely prohibit the trading of virtual currencies. Transactions must violate public order and good customs to be invalid. In addition, it should be noted that at the level of effectiveness, the 924 Notice is not a law or an administrative regulation. According to the provisions of the Civil Code, the 924 Notice is not a basis for denying the effectiveness of civil acts.

Judicial Practice

At this stage, although there are many courts that directly deny the validity of virtual currency transactions based on Document No. 289, Announcement 94, and Notice 924. However, according to lawyer Mankiw’s long-term practice experience,the court’s aforementioned judgment is actually an act of “lazy administration” that followed orders from supervision in the early stages of the development of the encryption industry. Many industries have experienced similar stages in judicial practice. As the industry develops and matures, it will eventually usher in the "spring" of positive policy documents from the courts at the effectiveness level.

Furthermore, some local courts that are more aware of the rule of law have done this, deeming contracts for the purchase and sale of virtual currencies to be legal and valid. For example, the Shanghai No. 1 Intermediate People’s Court issued the (2021) Shanghai Minzhong No. 11624 Civil Judgment after the 924 Notice, holding that “my country’s laws and administrative regulations do not prohibit the holding and legalization of virtual currencies or tokens. Circulation, and normal trading of virtual currencies between private individuals is not prohibited. Although the announcement jointly issued by the People's Bank of China and other departments in September 2017 stipulates that no organization or individual may illegally engage in token issuance financing activities and token financing platforms The so-called virtual currency is not allowed to be bought and sold, but in this case, Zhang purchased BSN coins and mining machines from He in an attempt to mine more BSN coins for profit, which is not the situation in the announcement. Therefore, the contract for buying and selling BSN coins should be valid. ”

Preliminary Conclusion

In summary, individuals can legally hold virtual currencies, but the effectiveness of personal transactions in virtual currencies is controversial. But attorney Mankiw tends to believe that it is legal for individuals to hold and trade virtual currencies.