Shanghai High Court: It is not illegal for individuals to hold virtual currency, but they are not allowed to illegally engage in token issuance and financing activities

Recently, the People's Court of Songjiang District, Shanghai, concluded a service contract dispute case caused by the effectiveness of a virtual currency issuance and financing service contract. The specific case shows that in 2017, an agricultural development company (Company X) signed a "Blockchain Incubation Agreement" with an investment management company (Company S) because it was optimistic about the development of virtual currency, and paid 300,000 yuan in service fees for token issuance, but the plan eventually fell through, so Company X sued the People's Court, demanding the termination of the contract and the return of 300,000 yuan in service fees by Company S. The People's Court of Songjiang District finally determined that the agreement was invalid and ordered Company S to return 250,000 yuan. After trial, the People's Court held that token issuance financing refers to the financing subject raising so-called "virtual currencies" such as Bitcoin and Ethereum from investors through the illegal sale and circulation of tokens. It is essentially an act of illegal public financing without approval, and is suspected of illegal sale of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities. Therefore, no organization or individual may illegally engage in token issuance and financing activities. There are legal risks in participating in virtual currency investment transactions. Any legal person, non-legal person organization or natural person who invests in virtual currency and related derivatives and violates the mandatory provisions of laws and regulations shall have the relevant civil legal acts invalid, and the losses caused by them shall be borne by themselves. Therefore, although it is not illegal for an individual to simply hold virtual currency, commercial entities cannot participate in virtual currency investment transactions or even issue tokens on their own at will. Once the bottom line of civil and criminal legal principles and rules is touched in the transaction behavior, they will bear the losses at the least, and be suspected of committing a crime at the worst. (Shanghai High Court)