China is seemingly inching towards broader crypto adoption, as a ruling from the Shanghai High People’s Court in China declared Bitcoin as a protected virtual asset.
Bitcoin, the ruling emphasizes, has a real economic value, as in the actual trial practice, the People’s Court has formed a unified opinion on the legal position of bitcoin, and identified it as virtual property.
History of the Bitcoin saga in China
The case of whether or not Bitcoin can be perceived as a virtual asset with its corresponding economic value began back in October 2020, when Cheng Mou requested that Shi Moumou return a loan of one Bitcoin. The defendant – Moumou, however, denied returning the funds. After half a year of legal battles, the case went to the District People’s Court before finally reaching the Shanghai High People’s Court - the highest court in Chinese states.
Interestingly, Shi Moumou’s defense made the statement that after the unprecedented ban on ICOs, trading, and mining in China, the contract between the parties must be rendered invalid. However, China’s supreme court disagreed with the interpretation, claiming that under existing Chinese law, possessing Bitcoin and other cryptocurrencies are not prohibited.
Is China weakening its stance on cryptos?
After imposing a ban on crypto mining, trading, and ICOs in China, local authorities left the room in their legislation, which cites that cryptos are, in fact, legal. However, there have been several incidents where the government has taken action against operations it deemed as being improperly regulated.
Meanwhile, individuals are far less flexible when it comes to dealing with cryptos, as major exchanges like Binance moved their headquarters to Malta, for example. But, under Chinese laws, and with the latest ruling, private individuals are free to use Bitcoin amongst themselves, as the world’s leading crypto has economic value.
Furthermore, China’s attempts to roll out a CBDC project dubbed the “digital yuan” may force people to go back again into a greyish area of crypto usage – the over-the-counter (OTC) trading, especially when crypto exchanges are banned from operation.
Market reaction
China and its authorities always have managed to inflict damage to the crypto sector – either by restricting access to cryptos or by indirectly affecting the prices on the market. The new ruling, however, may not have the power to push Bitcoin up in what seems to be a bearish market setting up.
During the past ten days, the crypto sector witnessed the wipeout of almost $500 billion of its market capitalization. Bitcoin is struggling to stay afloat at over $30,000, as the market leader dropped 9% weekly.
Ethereum has also seen better days, as the altcoin leader is close to losing ground above $2,000, with a 15% weekly loss.
Other cryptos like Ripple, Solana, Dogecoin, Avalanche, and Shiba Inu, experienced over 25% weekly price drops, mostly because of Terra (LUNA)’s price breakdown and the following delisting.