It is still legal to own Bitcoin in China despite the government blanket ban on trading. This is according to Sa Xiao who is a Council Member at the Bank of China’s Law Research Association. Beijing News quoted Xiao as follows:
‘’It is legal to own bitcoins in China…besides, the occasional exchange of bitcoins between individuals and individuals is legal’’
Bitcoin legal status has been contentious since the Chinese government banned Bitcoin trading in 2017. Accordingly, the official ban meant that even established exchanges like OKCoin, Huobi, and BTC China had to shut down operations and shift base.
This means that the question on the question of the legality of owning Bitcoin itself is pertinent and legitimate. Moreover, the matter of whether you incur legal liability for conducting Bitcoin business that posts losses is an issue.
To the latter, Xiao believes that anyone who runs a Bitcoin trading business that has caused customer losses significantly; you can face punishment as per Chinese criminal law. Anyone who knows of Chinese criminal law with regards to financial crimes understands the severity. These are under the class of illegal business practices that disrupt market order. The possibility of such charges cannot be ruled out.
Regulations on Lending Activities
In general, the Communist government in China seeks to tightly regulate the bitcoin market. This means that the prevalence of scams and rip-offs in the cryptocurrency space can be fodder. In a case reported by Beijing News, more than a hundred users were scammed of 7000+ BTC. The scammers went under the guise of borrowing users’ BTC to arbitrage between exchanges and distribute profits back to users. Nonetheless, they vanished with the proceeds after the users made a large deposit.
These traders, Yi Zhou and Xiang Li, successfully defrauded investors till April and have only been charged recently. Suspicion significantly rose when the interest, which was paid in yen, stopped arriving on time in April. The traders notably gained trust posing as Over-the-counter (OTC) traders on Chinese messaging app WeChat. The App has since banned cryptocurrency transactions this month possibly to stay on the safe side of authorities.
Notwithstanding, Bitcoin still remains a popular commodity for ordinary Chinese traders despite restrictions on trading and mining. This is because the coin is an efficient tool to obfuscate and transport wealth around the world. With rich Chinese citizens looking to avoid the XI Jinping’s administration crackdown on corruption, it is a popular choice.
The government proposed a ban on Bitcoin mining totally. The National Development and Reform Commission (NDRC) stated energy inefficiency as a reason for the move. This is in addition to previous bans on ICOs and most trading activities. As such, it is perfectly legitimate to wonder whether owning Bitcoin itself is a problem in China.
Owning Is Still Legal
The justification for ownership is that Bitcoin falls under the umbrella of virtual properties in China. There are legal protections for this under Chinese law as explained by Xiao. Xiao further told Beijing News that this view was in light of the existing legal framework which protects people’s rights of virtual properties. This includes Bitcoin. As such, occasional peer to peer trading in Bitcoin is under the purview of “disposition rights” which is under ownership rights according to Chinese law. Accordingly, trading between individuals is technically legal but the authorities can exert controls over lending and exchange activities.
This is a very important provision as it has ramifications for the tens if not hundreds of thousands of Bitcoin holders in the country. Therefore, ownership per se is not a crime but the government seems hell-bent on making everything other than that illegal in China. Subsequent developments to this issue will be interesting to track.