Chinese citizens and merchants have the right to trade and own cryptocurrencies, according to a verdict reached in court last week.
The Shenzhen Court of International Arbitration (SCIA) ruled that digital assets including Bitcoin are property under Chinese law.
SCIA released the verdict over WeChat in a Putonghua-language statement to press. Arbitrators elaborated on their decision in reference to provisions from China’s General Principles of the Civil Law.
“[Bitcoin] should not be used as a currency in the market. However, there is no law or regulation that explicitly prohibits parties from holding bitcoin or private transactions in bitcoin, but rather reminds the public about the investment risks.”
Property not Currency
The ruling clearly states that cryptocurrencies are property, not currency — a distinction for tax purposes. Bitcoins are taxed as ordinary income or assets subject to capital gain, depending on the situation, while currency is not.
In a 2014 Sydney Morning Herald article, Ron Tucker from the Australian Digital Currency Commerce Association explains the difference in simple terms.
“Saying bitcoin transactions [are] the same as transactions involving the exchange of commodity such as coal or wheat is to ignore the nature of the coin or the currency and for a value,” he said.
“Imposing a GST on a transaction where a person seeks to convert Australian dollars to bitcoin will impose a financial burden on every person wanting to be able to transact on bitcoin.”
Many countries follow this convention, despite protest from within the crypto community.
Cause for Celebration
Cryptocurrency fans around the world quickly seized on the news.
Twitter user @cnLedger was quick to broadcast the ruling to his followers, which went viral immediately. Meanwhile, Katherine Wu from Messari Crypto chimed in with analysis of the ruling and also shared her favorite line.
17/ My fav sentence: "The Party contends that Bitcoin has characteristics of a property (SOV), can be controlled by the owner, and has economic value to the owner. It does not break any laws. This arbitrator agrees.”
— Katherine Wu (@katherineykwu) October 26, 2018
The news comes as Chinese authorities crack down on citizens buying residential property overseas. For some, this is a way to get assets out of the country.
Australian Financial Review writer Michael Smith reported this week that people are trying to get around China’s US$50,000 foreign exchange quota, by any means possible.
Now, as cryptocurrencies earn legitimacy in court, Chinese nationals may have another path to circumvent Chinese Communist Party (CCP) authority.
But China’s government is wary of cryptocurrencies. Authorities see the threat posed by Bitcoin, Ethereum and others, according to a recent Princeton University report.
The Chinese government is well-known to change its mind, and has banned then allowed then banned cryptocurrency exchanges in the past. Does this ruling signal a thaw in CCP policy towards bitcoin? We’ll have to wait and see.
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Liz is a Canadian journalist and writer for Bitcoin Australia. Connect with her on Twitter @Elizabeth_Utley, or on Linkedin as Elizabeth Utley.