The legal landscape surrounding cryptocurrencies in China has long been shrouded in ambiguity. However, a recent ruling by the Shanghai High People’s Court has provided much-needed clarity—affirming that individual ownership of virtual currency is not illegal, while simultaneously reinforcing strict prohibitions against unauthorized token issuance and fundraising activities.
This landmark clarification stems from a real-world case involving blockchain-based financing services, offering crucial insights for individuals and businesses navigating the complex intersection of digital assets and Chinese financial regulations.
The Case That Set the Precedent
In 2017, an agricultural development company (referred to as Company X) entered into a so-called “Blockchain Incubation Agreement” with an investment management firm (Company S). Under the agreement, Company X paid 300,000 RMB for services related to launching its own digital token. The goal was to raise capital through a cryptocurrency-based fundraising model.
However, the project never materialized. Disputes arose, leading Company X to file a lawsuit demanding the return of funds. The case eventually reached the Songjiang District People’s Court, which ruled the contract invalid due to violations of financial regulatory policies. As a result, Company S was ordered to refund 250,000 RMB.
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Key Legal Interpretations from Shanghai High Court
On November 18, 2025, the Shanghai High People’s Court published an official analysis of the case, highlighting several critical legal principles:
1. Cryptocurrency Has Recognized Property Value
The court acknowledged that virtual currencies like Bitcoin and Ethereum are virtual commodities with identifiable economic value. Therefore, individuals holding such assets purely for personal investment purposes do not violate Chinese law.
This is a significant acknowledgment, especially given China’s broader crackdown on crypto trading and mining since 2021. It suggests a nuanced approach: while systemic financial risks tied to speculation are discouraged, private ownership itself isn’t criminalized.
2. Token Issuance = Illegal Public Fundraising
The court emphasized that any unauthorized issuance of tokens to raise funds constitutes an illegal public financing activity under current Chinese law. This includes:
- Initial Coin Offerings (ICOs)
- Security-like token sales
- Projects promising returns in exchange for digital asset investments
Such actions fall afoul of the State Council’s Financial Regulatory Ordinances and may trigger liabilities under securities, banking, and anti-fraud laws.
3. Commercial Entities Face Stricter Scrutiny
While individuals can legally hold crypto, businesses cannot engage in crypto-related investment services or issue tokens without approval. The Blockchain Incubation Agreement was deemed invalid because it facilitated unlicensed financial services—essentially acting as a backdoor to circumvent capital market regulations.
Understanding the Regulatory Line
China’s stance remains consistent: control over financial stability comes first. The government tolerates personal possession of digital assets but draws a hard line at any activity that could:
- Disrupt monetary policy
- Enable capital flight
- Facilitate fraud or Ponzi schemes
- Bypass traditional financial oversight
This means that even advisory or technical support services tied to token launches can be considered complicit in illegal fundraising if they enable regulatory evasion.
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These terms reflect common search intents from users seeking clarity on what they can and cannot do with digital assets under Chinese law.
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Frequently Asked Questions (FAQ)
Q: Is it legal for me to own Bitcoin or other cryptocurrencies in China?
A: Yes. According to the Shanghai High Court’s interpretation, personal holding of virtual currency is not illegal. You may own crypto as a form of virtual property. However, you cannot use it for payments, trading on domestic platforms, or any activity that disrupts financial order.
Q: Can a company launch its own token in China?
A: No. Any form of unauthorized token issuance for fundraising purposes is strictly prohibited. This includes ICOs, STOs, or any model where tokens are sold in exchange for capital. Doing so may lead to civil liability, administrative penalties, or even criminal prosecution.
Q: What happens if I sign a contract for crypto-related services?
A: Contracts that facilitate illegal financial activities—such as helping companies issue tokens—are likely to be declared null and void by courts. While partial refunds may be possible (as seen in the case), you cannot enforce profits or performance under such agreements.
Q: Does this mean crypto trading is now allowed?
A: No. While ownership is tolerated, trading, exchanging, or using crypto as payment remains banned under the 2021 joint notice issued by ten Chinese regulatory bodies. Domestic exchanges are shut down, and peer-to-peer trading carries reputational and operational risks.
Q: How does this affect blockchain startups?
A: Startups must avoid any business model resembling token-based fundraising. Focus on non-financial applications of blockchain, such as supply chain tracking, data authentication, or enterprise solutions—areas fully supported by national policy.
Q: Could this ruling influence future crypto laws in China?
A: Potentially. By recognizing cryptocurrency as a virtual commodity with property attributes, the judiciary is laying groundwork for more structured regulation. While full legalization is unlikely soon, clearer rules around inheritance, dispute resolution, and asset protection may emerge.
Navigating the Future: Compliance Over Speculation
For individuals and entrepreneurs alike, the takeaway is clear: possession is permitted; monetization through unauthorized means is not.
Those interested in digital assets should focus on:
- Educating themselves about legal boundaries
- Avoiding involvement in token launch projects
- Staying updated on judicial interpretations from higher courts
- Prioritizing compliance when exploring blockchain innovation
As global interest in decentralized finance grows, China’s cautious but evolving stance highlights the importance of aligning technological ambition with regulatory reality.
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Final Thoughts
The Shanghai High Court’s decision doesn’t signal a relaxation of China’s crypto restrictions—but it does offer valuable legal precision. By distinguishing between personal ownership and commercial exploitation, the ruling helps reduce uncertainty for citizens and businesses operating near the digital asset frontier.
While speculative ventures involving token issuance remain off-limits, legitimate uses of blockchain technology continue to thrive within regulated frameworks. For now, the message is simple: respect the rules, understand your rights—and never confuse tolerance with endorsement.