As per the first-ever legislation of China to have the word “code” in it, virtual assets comparable to bitcoin can now be passed on or inherited. The Civil Code of the People’s Republic of China (“Code”) was passed in the 3rd (third) session of the 13th National Individual’s Congress on May 28. 2020. The Code shall come into force on January 1, 2021.
While the move to treat the virtual currencies at par with a property that can be passed on to the generations is deterministic of nature of virtual currencies in China, however, there remains a question of its enforceability. The private key of blockchain is only known by the owner and should be shared with anyone. If the private key is shared with others, it is a possibility for them to send the virtual currency into their own wallet. The legislation is well-intentioned, but the implementation may face practical issues since the private key is imperative for the security of the currency wherever stored. With the new legislation in place, either the law can prevail or the security of it.
Further, it needs to be re-iterated that the cryptocurrencies itself are not banned in China. Vide notifications by the People’s Bank of China in 2013 and subsequently in 2017, banks and financial institutions are prevented from providing any services to any cryptocurrency exchange or virtual currency service providers. Further, even the initial coin offering is banned in China. Holding the cryptocurrency in itself is not prohibited. This can further be confirmed by the ruling in the matter before Shanghai Intermediate People’s Court where it was held that due to virtual currencies’ characteristics of being valuable, scarce, and disposable, it can be treated as virtual property. Further, virtual currencies are the properties of the internet. In yet another matter before the Shenzhen Futian District People’s Court, it has been held that the Ethereum is a legal property that has economic value though it is not a legal tender.
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