According to a Chinese court's ruling, virtual currency used in blockchain-based games are not legally protected.
The court ruled that play-to-earn (P2E) games and the in-game assets they include do not offer the same levels of investor protection as conventional investments and that players should conduct due research before investing. In a Shanghai court, a dispute involving the 2021-popular blockchain game Alexie came up.
According to the case's circumstances, the plaintiff Li Xiang paid the defendant Wang Meng about 700,000 yuan ($101,700) to set up accounts and play on Xiang's behalf. Meng did not send any additional money to Xiang after the first month's return of 80,000 yuan ($11,724), claiming the general fall of the virtual currency markets as the reason.
Meng was found to have sold in-game items for 113,000 yuan ($16,485), which he claims should be seen as the plaintiff's loan. However, the court determined that the plaintiff has no legal claim to the original 700,000 yuan ($101,700) invested with Meng because it is not protected by Chinese law.
The court also ruled that because it amounted to an abuse of property, the 113,000 yuan ($16,485) profit made from the sale of the tokens must be returned. It is important to highlight that all investments in the asset class are not covered by the law as a result of China's blanket prohibition on digital assets.
The relevant contracts that were signed as a result should be void because they harm the public interest. The public should increase their risk awareness, develop sound investment principles, and refrain from illicit financial actions like speculation in virtual currencies, the court ruled.
In spite of the court's verdict, the First Intermediate People's Court in Beijing determined that virtual currencies can be legally protected because there are no laws that "negate the protectability of cryptocurrencies itself as virtual property."
Although it is yet unknown if the court's decision will be followed by the rest of China's judiciary, the decision on P2E gaming strongly shows that the law still views these activities as criminal.
China's restriction fails to stop the country's use of digital assets.
Contrary to popular assumption, China's ban did not completely halt the use of digital currencies there. The nation defeated leading European nations en route to earning a top 10 spot in Chainalysis' 2022 Crypto Adoption Index.
Experts contend that the "ineffective and loose" execution of the ban by slow enforcement is to blame for the rise in digital asset activities in the nation. According to one investigative report, not all Chinese miners left the country; some merely went underground and concealed their operations using mining pools and Virtual Private Networks (VPN).
