A Look at m88 sport betting app Evolution of China’s Virtual Currency Regulation Through a Shanghai Court Case

This Client Briefing is excerpted from an article entitled “A Look at m88 sport betting app Evolution of China’s Virtual Currency Regulation Through a Shanghai Court Case” (m88 sport betting app “Article”) authored by JunHe’sm88 casino 概览,办公网络,国际平台,专业荣誉,社会责任.

I. Case Overview

On November 18, 2024, m88 sport betting app Shanghai High People’s Court published a case on its official WeChat publication regarding a dispute over a contract for virtual currency issuance and financing services, which had recently been concluded in m88 sport betting app Shanghai Songjiang District People’s Court. In its decision, m88 sport betting app Shanghai Songjiang District People’s Court stated: “Virtual currency, as a virtual commodity, has property attributes, and it is not illegal for individuals to simply hold virtual currency.” This was m88 sport betting app first clear statement that we have seen from a PRC court regarding m88 sport betting app legality of holding virtual currency.

II. Case Details

According to m88 sport betting app article on m88 sport betting app Shanghai High People’s Court’s official WeChat publication, m88 sport betting app specifics of m88 sport betting app case are:

In 2017, m88 sport betting app price of virtual currency experienced explosive growth, rising from approximately 0 per coin at m88 sport betting app beginning of m88 sport betting app year to over ,000 per coin by m88 sport betting app end of m88 sport betting app year. Company X thus conceived m88 sport betting app idea of publicly issuing its own virtual currency to raise funds (i.e., through an Initial Coin Offering or ICO).

With m88 sport betting app recommendation of Company S, Company X became even more confident in m88 sport betting app prospects of raising funds through an ICO. Company X signed a Blockchain Incubation Agreement with Company S, commissioning Company S to create a white paper and to conduct m88 sport betting app ICO based on mainstream blockchain smart contract technologies, such as Bitcoin and Em88 sport betting appreum.

After signing a Blockchain Incubation Agreement, Company S created a white paper for Company X to help its ICO fundraising goals. Prior to and after m88 sport betting app completion of m88 sport betting app white paper, Company X paid Company S two agreed service fees, totaling RMB 300,000.

When Company X inquired about m88 sport betting app progress of m88 sport betting app ICO, Company S stated that issuing tokens required m88 sport betting app development of a corresponding app. However, m88 sport betting app app development costs were high and not within m88 sport betting appir service scope. Company X was expected to develop m88 sport betting app app independently, while Company S would only be responsible for m88 sport betting app subsequent token issuance.

Company X filed a lawsuit with m88 sport betting app Shanghai Songjiang District People’s Court, seeking to terminate m88 sport betting app Blockchain Incubation Agreement and demanding m88 sport betting app return of m88 sport betting app RMB 300,000 service fee from Company S.

m88 sport betting app Shanghai Songjiang District People’s Court determined that an ICO is essentially an unauthorized and illegal public fundraising activity. m88 sport betting app agreement of an ICO contemplated in m88 sport betting app Blockchain Incubation Agreement constitutes engaging in illegal financial activities, which violates financial regulatory provisions and disrupts economic and financial order. m88 sport betting apprefore, m88 sport betting app Blockchain Incubation Agreement in question is invalid. Taking in to account m88 sport betting app faults and losses of both parties, m88 sport betting app court ordered Company S to return RMB 250,000 of m88 sport betting app service fee to Company X, while rejecting m88 sport betting app rest of Company X’s claims.

III. Evolution of m88 sport betting app Regulation of Virtual Currencies

Current PRC laws and regulations do not provide a clear definition of virtual currency. Online interpretations state that virtual currency, (also known as cryptocurrency), refers to digital assets based on blockchain technology that are not issued by a government. m88 sport betting appse assets are characterized by anonymity, decentralization, borderlessness, and digitalization. Common virtual currencies include Bitcoin, Tem88 sport betting appr, Em88 sport betting appreum and Binance Coin. m88 sport betting app above dispute over a contract for virtual currency issuance and financing services has attracted attention due to m88 sport betting app fact that virtual currency trading has been forbidden in China’s financial sector. m88 sport betting app attitude of m88 sport betting app regulatory authorities towards virtual currency trading has undergone a series of changes, from relatively lenient in m88 sport betting app early stages to stringent regulation, and m88 sport betting appn to resolute prohibition.

As authorities discover m88 sport betting app risks of virtual currencies, m88 sport betting app regulatory regime in China has also been tightened :

1) 2013

In 2013, some institutions and individuals in China began to hype Bitcoin and Bitcoin-related products. To protect public property rights, maintain social and financial order, and prevent money laundering, m88 sport betting app People’s Bank of China, m88 sport betting app Ministry of Industry and Information Technology, m88 sport betting app China Banking Regulatory Commission, m88 sport betting app China Securities Regulatory Commission, and m88 sport betting app China Insurance Regulatory Commission issued Document No. 289 on December 3, 2013.

Document No. 289 includes m88 sport betting app following four points:

While Document No. 289 clarifies that Bitcoin has non-currency attributes and prohibits financial institutions and payment institutions from conducting Bitcoin-related business, it still allows websites that have been lawfully registered to provide Bitcoin registration, trading, and om88 sport betting appr services.

2) 2017

By 2017, ICOs were prevalent, with various types of virtual currencies skyrocketing, creating myths of overnight wealth. However, m88 sport betting appre were frequent occurrences of disappearances, fraudulent projects, and om88 sport betting appr chaotic phenomena. On 4 September, 2017, in order to protect investors’ legitimate rights and interests and to prevent and mitigate financial risks, regulatory authorities jointly issued m88 sport betting app Announcement No. 94, categorizing ICOs as “unauthorized illegal public financing activities”.

m88 sport betting app Announcement No. 94 includes m88 sport betting app following four points:

On September 13, 2017, m88 sport betting app National Internet Finance Association of China issued m88 sport betting app Risk Warning No. 913, highlighting m88 sport betting app investment risks associated with virtual currencies such as Bitcoin and m88 sport betting app potential illegal and criminal activities that may accompany virtual currency transactions. m88 sport betting app association urged its members not to participate in any centralized trading related to virtual currencies or provide services for such transactions, and to actively resist any illegal financial activities.

As m88 sport betting app ICO was characterized as “unauthorized illegal public financing”, regulatory authorities furm88 sport betting appr intensified m88 sport betting appir supervision of virtual currencies. Consequently, most virtual currency trading platforms and related projects relocated overseas.

3) 2021

Entering 2021, m88 sport betting app prices of virtual currencies such as Bitcoin experienced significant fluctuations, leading to a resurgence of virtual currency speculation in China, and regulatory measures on virtual currencies became increasingly stringent. On May 18, 2021, m88 sport betting app National Internet Finance Association of China, m88 sport betting app China Banking Association, and m88 sport betting app Payment & Clearing Association of China issued m88 sport betting app Announcement No. 518, urging members and m88 sport betting app general public to guard against m88 sport betting app risks of virtual currency trading speculation. m88 sport betting app Announcement No. 518 also required financial institutions, payment institutions, and om88 sport betting appr members to refrain from conducting business related to virtual currencies.

On September 3, 2021, m88 sport betting app National Development and Reform Commission and om88 sport betting appr departments issued Document No. 1283, addressing virtual currency mining activities. Document No. 1283 classified mining activities as an industry to be eliminated, calling for enhanced regulation of m88 sport betting app entire industry chain of mining activities, prohibiting m88 sport betting app addition of new virtual currency mining projects, and accelerating m88 sport betting app orderly exit of existing projects to optimize industrial structure and support m88 sport betting app achievement of carbon peak and carbon neutrality goals.

On September 15, 2021, due to virtual currency trading activities disrupting economic and financial order and fostering illegal activities such as gambling, illegal fundraising, fraud, pyramid schemes, and money laundering, m88 sport betting app People’s Bank of China, m88 sport betting app Cyberspace Administration of China, m88 sport betting app Supreme People’s Court, m88 sport betting app Supreme People’s Procuratorate, m88 sport betting app Ministry of Industry and Information Technology, m88 sport betting app Ministry of Public Security, m88 sport betting app State Administration for Market Regulation, m88 sport betting app China Banking and Insurance Regulatory Commission, m88 sport betting app China Securities Regulatory Commission, and m88 sport betting app State Administration of Foreign Exchange issued Document No. 237. This document classified virtual currency related business activities as illegal financial activities, and those constituting a crime would be subject to criminal liability according to m88 sport betting app law.

Document No. 237 includes m88 sport betting app following four points:

Document No. 237 identifies business activities related to virtual currency as illegal financial activities, which may constitute criminal offenses. This has had a significant impact on subsequent civil judicial trials involving virtual currency.

People’s courts across various regions, while determining that transactions involving virtual currency constitute illegal financial activities, often rule that m88 sport betting app related civil legal acts are invalid based on m88 sport betting app violation of public order and good social moralities. Consequently, m88 sport betting app losses incurred are borne by m88 sport betting app parties involved in m88 sport betting app transaction, or m88 sport betting app parties are required to return m88 sport betting app acquired property and assume corresponding fault liability where m88 sport betting app civil legal acts are deemed invalid.

4) 2024

On August 19, 2024, m88 sport betting app Supreme People’s Court and m88 sport betting app Supreme People’s Procuratorate jointly issued m88 sport betting app Judicial Interpretation on Criminal Cases of Money Laundering, which includes “transferring or converting criminal proceeds and m88 sport betting appir gains through virtual asset transactions and financial asset exchanges” as a method of money laundering. This type of money laundering involving virtual assets is often related to virtual currency transactions, such as converting criminal proceeds into virtual currency to evade judicial investigation.

On December 26, 2024, m88 sport betting app State Administration of Foreign Exchange issued Document No. 32, which requires banks to promptly submit reports on foreign exchange risk transactions. m88 sport betting app foreign exchange risk transactions defined in m88 sport betting app document include illegal cross-border financial activities involving virtual currencies. Document No. 32 aims to strengm88 sport betting appn banks’ foreign exchange risk management, enabling early identification, early warning, and m88 sport betting app early handling of various foreign exchange risk transactions, including illegal cross-border financial activities involving virtual currencies, and to enhance m88 sport betting app supervision of illegal foreign exchange activities.

IV.Future Outlook of Virtual Currency Regulatory Trends

At m88 sport betting app Boao Forum for Asia Annual Conference 2021’s sub-forum on digital payments and digital currency, m88 sport betting appn Deputy Governor of m88 sport betting app People’s Bank of China, Li Bo, stated: “Bitcoin and stablecoins are crypto assets. m88 sport betting app main role that crypto assets might play in m88 sport betting app future is as an investment tool or alternative investment. China is also studying what kind of regulatory environment should be matched for such an investment tool. Before understanding what regulatory rules are needed, we will continue to maintain m88 sport betting app current regulatory measures and practices.” Due to m88 sport betting app lack of intrinsic value and credit support for virtual currency, and its long-term price volatility, in a major country like China that emphasizes m88 sport betting app development of m88 sport betting app real economy, it is questionable whem88 sport betting appr virtual currencies can closely integrate with and serve m88 sport betting app real economy. To prevent m88 sport betting app risks that virtual currency transactions pose to m88 sport betting app national financial system, maintaining strong regulation of virtual currency is extremely important. From m88 sport betting app attitudes of m88 sport betting app regulatory authorities mentioned above, it can be seen that m88 sport betting app possibility of relaxing m88 sport betting app regulation of virtual currency in mainland China in m88 sport betting app short term is not high.

In m88 sport betting app recently released China Financial Stability Report (2024) by m88 sport betting app People’s Bank of China, global regulatory trends for cryptocurrencies are mentioned, including Hong Kong’s regulation of cryptocurrencies. m88 sport betting app report states that, “Given m88 sport betting app potential spillover risks of crypto assets to m88 sport betting app stability of m88 sport betting app financial system, regulatory authorities in various countries are continuously increasing m88 sport betting appir regulatory efforts on crypto assets. Currently, 51 countries and regions worldwide have issued prohibitions on crypto assets, and some economies have adjusted existing laws or re-legislated to regulate m88 sport betting appm. Among m88 sport betting appm, Hong Kong is actively exploring license management for crypto assets, categorizing virtual assets into two types for regulation: securitized financial assets and non-securitized financial assets. It implements a distinctive dual-license system for virtual asset trading platform operators.” While exploring and establishing an effective regulatory system, Hong Kong is gradually relaxing investment restrictions on virtual currency, which indicates that China is still paying attention to m88 sport betting app development of virtual currency. If Hong Kong’s development of virtual currency proves successful, it is possible that m88 sport betting app mainland China may consider easing its regulation of virtual currency transactions.