In a landmark ruling, a Chinese court has declared that cryptocurrency cannot be used as a form of wage payment, emphasizing its legal distinction from fiat currency and its lack of protection under labor laws. The Shenzhen Qianhai Cooperation Zone People’s Court made the decision during a labor dispute involving claims of unpaid wages in cryptocurrency, further solidifying China’s restrictive stance on digital assets.
The Case: Crypto vs. Legal Tender
The dispute arose when Zhou, a senior engineer, accused his former employer of failing to honor an agreement to pay part of his salary in cryptocurrency. According to Zhou, his monthly compensation included a 25,000 yuan payment in USDT (Tether) alongside a 20,000 yuan bank transfer. The employer denied the existence of such an arrangement, challenging Zhou’s claims in court.
Referencing a 2021 notice from multiple Chinese regulatory agencies, the court reaffirmed that cryptocurrency lacks the legal status of fiat currency in China. It ruled that wage payments must strictly adhere to labor laws, which mandate compensation in legal tender. Agreements involving crypto payments, the court argued, cannot override these legal provisions.
Citing insufficient evidence to prove that cryptocurrency payments were part of the employment contract, the court ruled against Zhou. His appeal to the Shenzhen Intermediate People’s Court was also dismissed, with Judge Zhao Junjun emphasizing that wage agreements involving crypto violate public policy and financial laws.
China’s Broader Stance on Crypto
This ruling aligns with China’s broader regulatory crackdown on cryptocurrencies. In 2021, the Chinese government declared all crypto transactions illegal, citing concerns over financial stability and speculative trading. However, the country has shown interest in blockchain technology and the development of its central bank digital currency (CBDC), the digital yuan.
Despite its harsh stance on crypto trading and mining, China has continued to invest heavily in blockchain applications in industries such as supply chain management and finance. This dual approach reflects a nuanced strategy to harness blockchain’s potential while mitigating risks associated with decentralized digital currencies.
Implications for Crypto in Labor Agreements
This case underscores a critical legal barrier for cryptocurrencies in China’s financial ecosystem. While crypto may hold value, its lack of recognition as legal tender creates significant challenges for its use in everyday transactions, including employment contracts. Employers and employees in China must strictly adhere to labor laws, which currently leave no room for alternative payment methods like cryptocurrency.
The ruling serves as a stark reminder that, despite crypto’s global rise, its adoption faces substantial roadblocks in jurisdictions like China, where legal frameworks prioritize centralized control and financial stability over decentralized innovation.
UCW Newswire
