In recent years, the rise of digital assets has prompted many enterprises to explore whether they can legally buy, hold, or trade virtual currencies under a corporate entity. While individuals are increasingly familiar with cryptocurrency ownership, businesses face additional layers of compliance, risk management, and legal scrutiny. This article explores the current legal landscape in China regarding corporate involvement in cryptocurrency and NFT transactions, offering clear guidance on what’s permissible—and what carries risk.
Understanding the Legal Status of Virtual Assets
Before diving into corporate activity, it's essential to clarify the legal standing of virtual assets in China.
Cryptocurrencies like Bitcoin are not recognized as legal tender. According to multiple regulatory statements—including the 2013 Notice on Preventing Bitcoin Risks, the 2017 Announcement on Preventing Risks of Token Issuance and Financing, and the 2021 joint statement by the Internet Finance Association of China, the Banking Association, and the Payment Clearing Association—virtual currencies lack legal currency status and cannot circulate as money.
However, these same documents acknowledge the property value of major cryptocurrencies such as Bitcoin. They are treated as virtual commodities—digital assets that can be owned and transferred, provided they are not used for illegal purposes or monetary substitution.
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This distinction is crucial: while trading or holding crypto isn’t outright banned for individuals or entities, using it as currency or facilitating financial services around it is strictly prohibited.
Can Enterprises Buy and Hold Cryptocurrency?
Yes—enterprises can legally acquire and hold virtual currencies, particularly mainstream ones like Bitcoin, under certain conditions.
Under Article 127 of the Civil Code of the People’s Republic of China, network virtual property is protected by law. This includes digital assets such as cryptocurrency, so long as they are obtained legally and not tied to illicit activities (e.g., ICOs issued within China, which are considered illegal).
Since businesses—whether incorporated companies or unincorporated entities like partnerships—are recognized as civil subjects, they possess the legal capacity to engage in civil activities, including asset acquisition. Therefore, a company may purchase cryptocurrency using its own funds, provided:
- The transaction does not involve banking or payment systems (which are barred from crypto-related services).
- The intent is investment or asset diversification, not monetary substitution or public fundraising.
- Proper internal documentation and compliance protocols are in place.
Important: Use of Custody Agreements
Because cryptocurrency is typically held in digital wallets controlled by individuals (e.g., executives or employees), enterprises should establish custody agreements (also known as "holding-on-behalf" agreements) to formalize ownership.
Key elements of a valid custody agreement include:
- Clear identification of the asset: Only legally permissible cryptocurrencies (e.g., Bitcoin, Ethereum) should be specified.
- Ownership rights: The enterprise retains full economic interest in price fluctuations and profits.
- Compensation terms: Define any fees or compensation for the individual managing the wallet.
- Transfer clauses: Specify procedures for transferring control if the custodian leaves the company.
- Penalty provisions: Include consequences for breach of duty or unauthorized transfers.
- Force majeure: Account for regulatory changes or market disruptions.
- Governing law and jurisdiction: Choose jurisdictions with favorable legal interpretations, such as certain districts in Beijing, or opt for arbitration under Chinese or foreign law.
Is Crypto Trading or Speculation Allowed for Businesses?
While holding crypto is legally defensible, active trading or speculation ("crypto炒作") introduces significant legal risks.
Regulators have consistently warned against virtual currency speculation, especially when it involves market manipulation or large-scale trading operations. The 2021 joint announcement explicitly urged enterprises and individuals to "guard against speculative risks" and avoid treating crypto as an investment product.
Moreover:
- Enterprises that operate platforms facilitating crypto trading may violate financial licensing laws.
- Frequent buying and selling could be interpreted as engaging in unlicensed financial services.
- Price manipulation—such as wash trading or pump-and-dump schemes—may breach Article 14 of the Price Law, which prohibits unfair pricing practices like collusion, price inflation, or deceptive pricing.
Such actions could lead to:
- Fines and confiscation of illegal gains
- Business suspension
- Criminal investigation under charges like illegal business operations (though actual conviction under Article 225 of the Criminal Law remains rare)
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Thus, while passive holding is low-risk, speculative trading—even by corporations—falls into a gray zone that regulators actively monitor.
Can Companies Buy NFTs?
Yes. Enterprises can legally purchase and own NFTs, especially those representing digital art, collectibles, or intellectual property.
NFTs (Non-Fungible Tokens) are widely regarded as digital virtual property protected under Article 127 of the Civil Code. Their characteristics—scarcity, uniqueness, and transferability—align with traditional definitions of property.
Businesses might acquire NFTs for various purposes:
- Brand marketing (e.g., launching branded digital collectibles)
- Investment in digital art
- Securing rights to digital content
However, two critical limitations apply:
- Intellectual Property Rights: Owning an NFT does not automatically confer copyright or usage rights to the underlying content. Without explicit permission from the creator or rights holder, commercial use may constitute IP infringement.
- Secondary Market Restrictions: There are currently no officially licensed secondary NFT trading platforms in China. Reselling NFTs on informal markets may expose businesses to regulatory scrutiny or contractual disputes.
Is NFT Speculation Permissible?
Similar to crypto, speculative NFT trading carries legal exposure, even if NFTs themselves are lawful to possess.
While most goods—including NFTs—are subject to market-regulated pricing, businesses must avoid behaviors listed in Article 14 of the Price Law, such as:
- Colluding to inflate prices
- Fabricating demand through fake bids
- Misleading pricing tactics
For example, staging fake auctions to drive up an NFT’s price could violate both the Price Law and the Auction Law, leading to penalties including fines and operational restrictions.
Frequently Asked Questions (FAQ)
Q: Can a Chinese company open a crypto exchange?
A: No. Operating a cryptocurrency exchange violates China’s ban on crypto-related financial services. Such activities require financial licenses that are not granted for crypto trading platforms.
Q: Is it safe for a business to hold Bitcoin long-term?
A: Yes, as long as it’s held as a digital asset—not used for payments—and stored securely via proper custody arrangements. Regulatory risk remains low for passive holding.
Q: Can a company use crypto for employee bonuses?
A: Technically possible but risky. Paying salaries or bonuses in crypto may breach foreign exchange controls and tax regulations. It’s advisable to convert to fiat before disbursement.
Q: Are domestic NFTs fully legal?
A: Purchasing and holding NFTs is legal. However, reselling them on unregulated platforms may violate cultural or financial regulations, especially if tied to speculative behavior.
Q: What happens if a custodian steals company-held crypto?
A: The enterprise can pursue civil remedies based on the custody agreement. If fraud or embezzlement is proven, criminal charges may also apply.
Q: Can a business mint its own NFTs?
A: Yes—but only if it owns the underlying intellectual property or has proper licensing. Unauthorized minting infringes on copyright laws.
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Conclusion
Enterprises in China can legally buy and hold major cryptocurrencies and NFTs as virtual property under current civil law. However, any activity resembling financial services, speculation, or market manipulation crosses into high-risk territory. Clear internal policies, custody agreements, and strict adherence to IP and pricing laws are essential for compliance.
As digital assets continue to evolve, businesses must balance innovation with caution—leveraging opportunities while respecting regulatory boundaries.