The apex Chinese court has ruled that virtual assets can be used to settle basic debts, despite the country’s ban on cryptocurrency transactions. The decision was made during a conference held by the Supreme People’s Court of China earlier this year, media reports said.
According to the court, cryptocurrencies share some similarities with virtual properties, and if the parties involved in a case agree to use small amounts of cryptocurrencies to settle their debts, the contract will be considered valid by the Chinese courts.
However, if the cryptocurrency transaction cannot be executed due to policy restrictions, the court will determine the compensation based on the actual value of the agreed amount of cryptocurrencies when the contract was signed.
The Chinese government imposed a ban on initial coin offerings and crypto exchange services in September 2019. The Supreme Court added that courts will not accept any complaints from users if the cryptocurrency was traded after that date, and if trading platforms or token issuers failed to fulfill their liquidation obligations.
It should be noted that the use of cryptocurrencies as payments for fiat currencies or physical commodities under the guise of a contract is still illegal.
This decision is in line with the Chinese government’s stance on cryptocurrencies, which emphasizes that cryptocurrencies like Bitcoin, Ether, and Tether do not have the same legal status as fiat money. However, outside mainland China, Hong Kong’s initiatives to build a crypto hub are receiving Beijing’s backing, with Chinese state-owned financial institutions providing banking services to local crypto firms.
The ruling by the Supreme Court could provide some clarity and flexibility for businesses that want to use virtual assets for transactions within China, despite the blanket ban on cryptocurrency transactions. However, it remains to be seen how this decision will be implemented in practice and whether it will have any significant impact on the country’s crypto market.
