China’s Supreme Court Approves Digital Currencies to Settle Debt Payments
China implemented an exodus from its native crypto industry in September 2021. However, the regulators in the nation have continued to introduce more crypto-friendly legislature. The Supreme Court of China has recently issued new regulatory guidelines for financial disputes.
To this end, the federal authority has claimed that a small amount of crypto can be used to settle debts as long as both parties are in agreement.
In its ruling, Supreme Court judges have recognized cryptocurrencies as virtual property. Thus, the court ruled that debt settlement with cryptocurrencies should be legal as long as there is no other legal caveat involved.
The court expressed in its pronouncement that cryptocurrencies can be used as a viable medium of exchange to settle debts in the matter of labor services, mutual exchange, and other basic business dealings. In so far as there are no constitutional infringements the court will recognize the contract legally binding.
The new rule can help crypto investors to create new financial contracts and business deals without the worry of breaching the legal code of conduct.
New Terms and Conditions for Crypto Debt Payment Contracts
Supreme Court of China has also specified the terms for viable crypto debt payment contracts. They maintained that in the cases where one party is offering crypto payments to another but the receiver fails to fulfill their part of the bargain, the court reserves the right to order compensation depending on the value of the total virtual property transferred at the time of contract signing.
Chinese legal system has taken a different route in comparison to the government policies concerning the sector.
It means that cryptocurrency investors in the country can get a chance to look at new regulatory guidelines. China imposed a complete ban on crypto advertising, mining, and trading but recently the demand for crypto trading in the region has continued to rise.
A report published in 2022 revealed that China is among the 10 countries in the world with the highest crypto adoption index. Another case of changing the stance of Chinese legislatures was seen in September 2022 when the Beijing court ruled in favor of crypto trading.
China has banned cryptocurrencies on its local social media and internet hubs. Better yet, the Chinese lawmakers have been lenient towards its citizens in the matter of crypto-related regulations. Last year in September, The People’s Court of Beijing ruled in favor of allowing crypto trading rights for its citizens despite the ongoing embargo.
However, the Intermediate court has mandated the condition that traders may only approach cryptocurrencies as virtual assets and not use them as virtual currencies.
On account of the conflicting rulings, it is yet to be decided whether the ruling of the Supreme Court grants full legal recognition to cryptocurrencies. However, in terms of legal hierarchy, Supreme Court is the highest legislative authority second only to the National People’s Congress or NPC.
However, the current softening of Chinese legislatures signals consideration of the state towards the growing crypto trading appeal of its citizens. It is important to mention that Chinese financial regulators have imposed a 20% capital gains tax for retail cryptocurrency investors and Bitcoin mining operators.