China’s legal stance on cryptocurrency and virtual assets is unique and multi-layered. While financial regulators have heavily banned crypto business activities, the judicial system—led by the **Supreme People’s Court (SPC)**—has built a distinct framework to handle virtual currencies in criminal and civil cases.
The policy landscape is shaped by several landmark SPC rulings and judicial interpretations.
1. Criminalization of Crypto as "Illegal Fundraising"
A major development occurred when the Supreme People’s Court revised its judicial interpretations regarding criminal financial activities (QUAN, 2022).
The Rule: The SPC explicitly added "virtual currency trading" to the official list of methods used to illegally absorb public deposits (QUAN, 2022).
The Nuance: This rule does not mean holding or peer-to-peer trading is automatically a crime. Instead, it targets actors who use crypto as a deceptive vehicle to pool money from the general public under the promise of guaranteed returns or illegal investment schemes (QUAN, 2022).
2. Crackdown on Crypto-Driven Money Laundering
The SPC, alongside the Supreme People's Procuratorate, actively enforces rigid guidelines explicitly identifying cryptocurrency transactions as a mechanism for money laundering and hiding illicit gains (Chou, 2024; Wan, 2023). Under these rules:
Converting criminal proceeds into virtual currency or using over-the-counter (OTC) crypto networks to transfer funds across borders is prosecuted severely under China’s Anti-Money Laundering (AML) legal frameworks (Chou, 2024; Wan, 2023).
It aligns with the government's broader "parallel investigation" strategy, which pushes law enforcement to track the financial footprints of both the core crime and the underlying crypto laundering channels simultaneously (Chou, 2024).
3. Civil Law Status: "Virtual Property" vs. Void Contracts
In civil litigation, the SPC and lower courts navigate a complex duality regarding how crypto is treated under the Chinese Civil Code (Cheng, 2026; Shen, 2021).
Protected as Property: Legally, the Chinese judiciary treats Bitcoin and similar crypto assets as "virtual property" or commodities (Shen, 2021). If an individual's crypto is stolen or unlawfully withheld, courts have ordered the return of the assets or monetary compensation based on their commodity value (Shen, 2021).
Commercial Contracts are Void: While holding crypto as property is legal, using it for business or investment contracts is highly restricted. The SPC maintains that commercial crypto investment transactions violate "public order and good morals" and contradict national financial safety mandates (Cheng, 2026; Shen, 2021). Therefore, if a business partnership involving crypto trading fails, courts generally declare the contract null and void, meaning judges will not help investors recover "promised profits" from illegal activities (Alekseenko, 2021; Cheng, 2026).
4. The Irony: Embracing Blockchain as Judicial Evidence
While the SPC strictly limits the financial use of virtual currencies, it highly favors the underlying technology (Sahara, 2024; Zou & Chen, 2024).
The SPC issued formal rules establishing that blockchain-authenticated data is legally binding in court (Sahara, 2024). China's dedicated "Internet Courts" (in Hangzhou, Beijing, and Guangzhou) utilize highly advanced, state-backed judicial blockchain networks to record, seal, and verify electronic evidence for copyright and contract disputes (Zou & Chen, 2024).
Summary of the Hybrid Approach
In the eyes of China’s Supreme People's Court, virtual currency is a legal property if you simply own it, an illegal financial instrument if you try to run a business or pool funds with it, and its underlying blockchain is a trusted tool for the state’s digital justice system.
References
Alekseenko, A. P. (2021). Regulation of Cryptoassets in Mainland China, Hong Kong, Macau and Taiwan. China and WTO Review, 7(2), 353–372. Cited by: 6
Cheng, K. Y. (2026). Invalidating Civil Juristic Acts: Public Order and Good Morals in the Chinese Civil Code. Asian Journal of Comparative Law.
Chou, H. W. (2024). China's Anti-money Laundering Laws on Combating the Illegal Trade in Wild Species. Traffic.org.
QUAN, W. (2022). Metaverse: A Rational View of How New Rules against Illegal Fundraising Affect the Virtual Currency Industry. Han Kun Law.
Sahara, A. (2024). BLOCKCHAIN EVIDENCE: HOW SMART LITIGATORS CAN KEEP IT OUT AT TRIAL. Fordham Law Review, 92, 42–59. Cited by: 2
Shen, W. (2021). New developments on regulation of cryptocurrency in China. Journal of Investment Compliance, 22(2), 133–136. https://doi.org/10.1108/joic-11-2020-0045 Cited by: 5
Wan, Z. (2023). Understanding China's Cryptocurrency Stance: Analysis of the Recent Developments and Future Prospects. Cardozo International & Comparative Law Review.