• Chinese Supreme Court recently clarified the legal framework for disputes involving cryptocurrencies.
• Cryptocurrencies can be used to settle debts up to an undisclosed amount, provided a valid contract stipulating payment in such assets is already active and no other local laws take precedence.
• Crypto used to settle debt are not considered legal tender in China.
Chinese Ban on Cryptocurrency Transactions
In September 2021, China implemented a ban on cryptocurrency transactions and heavily curtailed crypto mining operations. In practice though, this ban was more of a general guideline.
Crypto Taxation in China
Since the implementation of the ban, Chinese policymakers have discussed crypto taxation as well as further deliberation on how Chinese courts should proceed when faced with lawsuits involving cryptocurrencies.
Debts Can Be Settled With Crypto
Recently, members of the Chinese Supreme Court declared that debts can be settled in cryptocurrency up to an undisclosed amount, provided a valid contract stipulating payment in such assets was already active and no other local laws take precedence. However, it is reiterated that the cryptocurrencies used to settle the debt are not legal tender.
Invalid Contracts Stipulating Crypto as Legal Tender
If any contract stipulates that cryptocurrencies are legal tender, Chinese courts are to declare it invalid according to the statement made by members of the Chinese Supreme Court.
Conclusion
Although cryptocurrency transactions are technically banned in China, their use is still acknowledged under certain conditions with regards to settling debts or paying taxes. Furthermore, contracts stipulating crypto as legal tender will be declared invalid by Chinese courts.