A recent ruling by the Jiangsu Provincial High Court in China has left a Singaporean investor with significant losses after a disputed crypto investment.

The court ruled that the contract between the investor, Pan, and a Chinese citizen, Tian, was invalid, citing that virtual currency investment is illegal in China.

The ruling emphasizes that virtual currency businesses are illegal financial activities and are strictly prohibited. The court also noted that overseas cryptocurrency exchanges serving Chinese residents are illegal.

Pan Loses Crypto Funds to Ignorance

Pan and Tian’s issues began in 2019 when the former invested 15.74 million yuan ($2,169,239) in the latter’s cryptocurrency project, “MFA Blockchain.” But when Pan tried to withdraw his funds, Tian refused, citing tight market value. 

In the long run, Tian returned 10.6 million yuan ($1,460,859) to Pan, with 5.15 million yuan ($757,993) remaining. To get his remaining funds, Pan took legal action, presenting the case before the Intermediate People’s Court of Yancheng City and the Jiangsu High Court.

Unfortunately, for Pan, the Chinese authorities ruled against him, arguing that the project involved virtual currency speculation, which is against China’s laws on financial security and public order. Following the court’s ruling, Pan then lost his remaining investment funds. 

The court’s ruling has sparked concerns among foreign investors about the risks of investing in China’s cryptocurrency market. Investors must understand local laws and regulations before cooperating with mainland Chinese residents in crypto projects.

China Anti-Crypto Stance

China’s regulation of cryptocurrencies is notoriously strict, with a ban on cryptocurrency-related business activities issued in 2021. The country’s courts tend to deny the validity of contracts involving virtual currency transactions, citing damage to public interest. 

However, there are signs that China’s stance on crypto may be softening. In November, Hashkey Group CEO Xiao Fieng stated in a recent interview with the South China Morning Post that he believes Donald Trump’s pro-crypto stance could reignite China’s interest in digital assets.

A month later, the People’s Bank of China (PBoC) revealed the 2024 report on China’s Financial Stability which revealed critical insights into the evolving landscape of cryptocurrency regulation influenced by Hong Kong’s landmark successes.