Written by: Liu Honglin, Attorney at Mankiw LLP
In recent years, with the development of blockchain and virtual currency, virtual currency has gradually developed from a niche technology to an important part of the global financial system, but it has also caused many legal and policy issues due to anonymity and regulatory uncertainty. In a recent article, a certain bar association simply labeled virtual currency as "contraband" and claimed that it should not be identified as property in criminal cases. This conclusion is not only crude and simplistic, but also contrary to the current widespread use of virtual currency internationally.
Virtual currency has never been explicitly defined as a prohibited item in my country. On the contrary, it is a financial innovation. Although my country does crack down on illegal virtual currency transactions, this is very different from whether it is essentially a "prohibited item". The author of the Bar Association's article clearly confuses the financial attributes of virtual currency with the definition of a prohibited item in law, and simplifies a complex issue. This statement is likely to mislead the public.In fact, the main problem with virtual currency lies in its regulatory attributes. As more and more people and companies use virtual currency for transactions around the world, many countries, including China, are gradually formulating relevant policies and laws to regulate its use, rather than simply classifying it as "contraband". The author of the Bar Association's article compares virtual currency with illegal items such as drugs and guns, which seems too arbitrary.
Jiangsu High Court ruling: Virtual currency transactions are invalid, but not "contraband"
In order to further discuss the legal attributes of virtual currency, the author of the article also cited a case from the Jiangsu High Court for support, but obviously, the support was somewhat unstable.
The case is this: In 2019, Tian and Pan signed a cooperation agreement involving speculation in MFA virtual currency. Tian was responsible for technical development, and Pan provided financial support. Both parties clearly knew that their investment goal was to speculate in virtual currency. However, since MFA virtual currency was eventually delisted from the Singapore Exchange and the account was frozen, Pan suffered heavy losses and filed a lawsuit to demand the return of the money.
The core point of the court's judgment is that virtual currency transactions violate China's financial order, so the contract was deemed invalid. The Jiangsu High Court also clearly pointed out in the second instance that speculation in virtual currency is an act of disrupting the financial order, so the investment agreement between the two parties violates public order and good morals, and the contract was deemed invalid. The core of this judgment lies in the illegality of virtual currency transactions, not that virtual currency itself is "contraband."
We can see that the Jiangsu High Court’s ruling clarifies the status of virtual currency transactions under Chinese law – illegal financial activities. This illegality is mainly aimed at the behavior of speculating on virtual currency as a financial instrument, rather than simply defining virtual currency as a “contraband”. This distinction is important because it affects the status and development of virtual currency in the future legal and regulatory framework.
The author of the article also mentioned that virtual currency should not be considered as property in crimes such as theft and fraud. This view seems to be in the position of protecting legal justice, but in fact it ignores the important role played by virtual currency in real economic activities. If virtual currency is not considered as property, then does stealing and fraudulent use of virtual currency not count as a crime? This is obviously unreasonable.
Although the Supreme People's Court and the Supreme People's Procuratorate have not yet issued specific judicial interpretations on virtual currencies, there have been several cases showing that virtual currencies can be considered property in certain circumstances. Although there is no clear legal basis for this practice, from the perspective of maintaining social justice, courts often treat virtual currencies as property with economic value. For example, the theft of virtual currency has been identified as a criminal offense in many judicial cases. When handling these cases, courts generally treat virtual currency as property with economic value. Although the nature of virtual currency is different from traditional currency and property, its economic value has been widely recognized worldwide. If the law cannot effectively combat the theft of virtual currency, similar crimes will only become more rampant.
The legal status of virtual currency is indeed in a gray area, but this does not mean that it cannot be protected by law. On the contrary, the law needs to reasonably interpret and protect virtual currency based on actual circumstances. Denying the property status of virtual currency will only give criminals an opportunity to take advantage of it, and will damage the fairness and justice of the law.
The author of the article simply denies the property attributes of virtual currency, which is not only contrary to existing judicial practice, but also ignores the actual status of virtual currency in the global economy. As more and more companies and individuals participate in virtual currency transactions, the economic value of virtual currency is becoming more and more obvious. In this case, the law needs to keep up with the pace of technological and economic development and formulate clearer rules, rather than simply excluding it from legal protection.
The future of virtual currency: regulation and development coexist
As part of the global financial system, virtual currency has demonstrated its strong innovation potential. Whether in cross-border payments, financial inclusion, or decentralized finance (DeFi), it has an influence that cannot be ignored. The future development of virtual currency is destined to be a process of coexistence of regulation and innovation. Although China has strictly regulated virtual currency transactions, it has not completely blocked its potential as a technological innovation. While regulating virtual currency, many countries are actively exploring how to use this emerging technology to promote the development of financial technology. For China, how to seize the technological opportunities brought by virtual currency while preventing financial risks is a problem that must be faced in the future.
We need more rational discussions and thinking about the future of virtual currency, rather than passively being misled by some misleading remarks. The technological and economic transformation power behind virtual currency is what we should really focus on. As for those "contraband" remarks that we don't understand very well, let them become an untimely footnote in the course of the times.