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This week, Shanghai High People’s Court said that Bitcoin, the world's largest cryptocurrency by market capitalization, is a "virtual property" entitled to legal protections under Chinese law. This declaration stunned outsiders, given the country's decision to ban cryptocurrency last year. 

This is the first time a top court in China has ruled on Bitcoin.

In 2017, Beijing pursued a prohibition on crypto trading, which then shifted to stopping crypto miners, causing a massive exodus of mining to Kazakhstan and the United States.

According to the court, Bitcoin maintains “a certain economic value" and the digital asset "conforms to [virtual] property’s attributes."

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Given this situation, "the legal rules of property rights are applied for protection,” the court said.

The Shanghai Baoshan District People's Court was deciding on an October 2020 case involving a Chinese citizen named Cheng Mou who asked another individual named Shi Moumou to return one Bitcoin, which was offered as a loan. Last February, the court ruled that Moumou needed to return the Bitcoin within ten days.

However, Moumou failed to repay the loan, prompting the case to continue. The Chinese court then sought assistance from the crypto trading platform which originally conducted the transaction, but there was no address for the court to use for the company, which was registered overseas.

The court determined that the digital asset constituted virtual property, given its ability to maintain value, scarcity and disposability. The digital assets thus had property rights and could be assessed as virtual property under the existing rules.

Despite China's ban on virtual currencies, the world's most-populous country is aggressively pursuing the digital yuan, a central bank digital currency that was trialed during the Beijing Winter Olympics.