China Court Ruling: Holding Cryptocurrency Is Legal, But Token Issuance Is Not

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In a landmark decision, the Shanghai Songjiang District People’s Court has clarified the legal status of cryptocurrency in China, delivering a nuanced verdict that distinguishes between personal ownership and commercial use. The ruling confirms that individuals holding virtual assets like Bitcoin are not violating Chinese law, while simultaneously reinforcing the ban on token issuance and crypto-related fundraising activities.

This judgment marks a significant moment in China’s evolving digital asset landscape, offering clarity amid years of strict regulatory crackdowns. While the country remains one of the most restrictive when it comes to cryptocurrency trading and mining, this case underscores a growing legal recognition of digital assets as property—even within a tightly controlled financial system.

Personal Crypto Holding Is Not Illegal

The court case centered around a service contract dispute tied to cryptocurrency issuance and financing services. After thorough deliberation, the court ruled that simply holding cryptocurrency does not constitute an illegal act under current Chinese law.

Judge Sun Jie, who presided over the case, emphasized that although China prohibits the use of cryptocurrencies as a payment method and has banned trading platforms, cryptocurrencies themselves are recognized as virtual commodities with legitimate property rights. This means individuals retain the right to possess and transfer digital assets privately.

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This interpretation aligns with previous judicial practices where courts have treated crypto holdings as personal property in divorce settlements, inheritance cases, and asset disputes. Despite the absence of formal legalization, the de facto acknowledgment of crypto as an asset class suggests a subtle but important shift in legal thinking.

Token Issuance Remains Strictly Prohibited

While personal ownership is tolerated, the court drew a firm line at commercial activities involving digital tokens. It reaffirmed that initial coin offerings (ICOs) and token-based fundraising are illegal financial activities, falling under unapproved public financing.

Such actions may lead to charges of illegal fundraising, financial fraud, or disruption of economic order. The ruling warns that any organization or individual conducting token issuance within mainland China faces severe legal consequences.

Judge Sun highlighted the risks tied to cryptocurrency’s core features—anonymity and decentralization—which can be exploited for money laundering, tax evasion, and other illicit purposes. As such, while private holding is not criminalized, commercial exploitation remains under strict regulatory scrutiny.

China’s Dual Stance on Blockchain vs. Cryptocurrency

One of the most intriguing aspects of China’s approach is its clear separation between blockchain technology and cryptocurrency. While crypto trading and mining have been banned since 2021, the government continues to promote blockchain development as a strategic national priority.

Official statements repeatedly describe blockchain as a “core future technology” capable of transforming supply chains, finance, logistics, and digital governance. State-backed initiatives like the Blockchain-based Service Network (BSN) reflect this commitment to infrastructure innovation.

Yet, experts argue that fully decoupling blockchain from cryptocurrency is impractical. In most global ecosystems, tokens serve as incentives, governance tools, and value carriers essential to network functionality. China’s attempt to build a token-less blockchain economy presents both technological and economic challenges.

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Regulatory Evolution: Signs of Potential Softening?

Despite its hardline stance, there are indications that China may be testing the waters for more nuanced regulation. Hong Kong has emerged as a key pilot zone, introducing a licensed crypto exchange framework to attract institutional investors and global capital.

This regional openness is widely seen as a controlled experiment—potentially paving the way for broader policy adjustments on the mainland. Additionally, China’s aggressive push for its digital yuan (e-CNY) reveals a deeper engagement with decentralized finance concepts, borrowing technical insights from existing crypto networks.

Though the e-CNY operates under centralized control, its development demonstrates that Chinese regulators are closely studying crypto mechanics—not just to mitigate risks, but also to harness their efficiency.

Frequently Asked Questions (FAQ)

Q: Is it legal for individuals in China to own Bitcoin?
A: Yes. According to recent court rulings, personal possession of Bitcoin or other cryptocurrencies is not inherently illegal. However, users cannot use them for payments or engage in trading through domestic platforms.

Q: Can I transfer my cryptocurrency to someone else in China?
A: While not explicitly prohibited, peer-to-peer transfers exist in a legal gray area. As long as no commercial activity or profit-making intent is involved, such transfers may be treated as private asset exchanges.

Q: Why does China ban crypto trading but support blockchain?
A: The government seeks to leverage blockchain’s transparency and efficiency while avoiding risks associated with decentralized currencies—such as capital flight, loss of monetary control, and financial instability.

Q: Are there any legal crypto platforms in China?
A: No. All cryptocurrency exchanges operating within mainland China were shut down in 2017–2018. Only Hong Kong permits licensed crypto trading for qualified investors.

Q: Could China ever lift its crypto ban?
A: A full reversal is unlikely in the short term. However, continued development of the digital yuan and Hong Kong’s regulatory sandbox suggest a long-term strategy of selective integration.

Q: What happens if I’m caught mining or trading crypto in China?
A: Mining operations face shutdowns and penalties. Individuals caught engaging in large-scale trading or fundraising may face fines or criminal charges related to illegal financial activities.

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Final Thoughts

The Shanghai court ruling does not signal a sudden liberalization of China’s crypto policy—but it does reveal a maturing legal framework. By distinguishing between passive ownership and active financialization, authorities are crafting a more precise regulatory language.

For global observers, this case offers valuable insight: even in highly controlled environments, digital assets are increasingly being recognized as part of modern wealth. The challenge lies in balancing innovation with stability—a balancing act that will shape the future of finance worldwide.

As jurisdictions refine their approaches, understanding these legal nuances becomes essential for investors, developers, and policymakers navigating the next phase of the digital economy.