Chinese Supreme Court Clarifies Crypto Disputes: Debts Settled with Crypto
• China’s Supreme Court has clarified how crypto disputes should be handled in Chinese courts.
• Debts can be settled with cryptocurrency, provided a valid contract stipulating payment in such assets was already active and no other local laws take precedence.
• Cryptocurrencies are still not legal tender in China, but they can be used as an investment asset and taxed accordingly.
Chinese Crypto Regulations
Since September 2021, the Chinese government has implemented regulations banning cryptocurrency transactions and curtailing crypto mining operations. However, these rules have only been applied on a general basis – leading to more discussion of taxation on cryptocurrencies used as investment assets.
Debts Can Be Settled With Crypto
The Chinese Supreme Court recently declared that debts could be settled with cryptocurrency up to an undisclosed amount, provided a valid contract stipulating payment in such assets was already active and no other local laws took precedence. It is reiterated that cryptocurrencies are still not legal tender in China.
Crypto Not Considered Legal Tender
Although debts can be settled with cryptocurrency, it is important to note that this does not make them legal tender or currency in any way – according to the court’s statement. If contracts state otherwise then these are invalid under Chinese law.
Cryptocurrency As Investment Asset
Despite the ban on cryptocurrencies being used as currency, they can still be owned by locals and treated as an investment asset – which can consequently be taxed accordingly by the government. This creates further deliberation on how Chinese courts should proceed when faced with lawsuits involving cryptocurrencies.
It is clear that despite the ban on cryptocurrency transactions within China, there is still a framework for legal disputes arising from their use if necessary – providing that certain conditions are met and no other local laws take precedence over them.