The court clearly states: Personal virtual asset transactions are not equivalent to illegal operations! The industry welcomes a rational dividing line

Recently, a ruling from the Shanghai Second Intermediate People’s Court has attracted attention, involving a redefinition of the nature of personal virtual currency transactions. This case is regarded within the industry as one of the most significant legal signals of the year, warranting careful interpretation by every market participant.

Breakthrough Statements at the Judicial Level

The Shanghai Second Intermediate Court provided a fairly clear legal stance when handling related cases: ordinary individual investors engaging in buying and selling virtual assets, solely for investment purposes rather than operating activities, are generally not considered to be committing the crime of illegal business operations.

What does this imply? Simply put, if you are a compliant trader, using your own funds to buy and sell virtual currencies in the market, whether you profit or incur losses, as long as you do not cross certain key bottom lines, your personal actions should not be criminally characterized:

First is the distinction of operational attributes. The law is beginning to recognize that personal investment and commercial operation are fundamentally different. The former is a sporadic, non-continuous asset allocation behavior; the latter involves organized, systematic, profit-oriented industrial activities. The two should not be conflated.

Second is the boundary of capital settlement. Buying and selling virtual currencies as an individual is one thing, but if you start acting as an intermediary for fiat-to-crypto exchanges or provide large-scale payment settlement services, you enter the realm of financial services, which falls under a different regulatory framework.

Third is the red line of criminal risk. Any behavior involving fraud, illegal fundraising, money laundering, and other criminal activities remains a focus of judicial crackdown, regardless of compliance in individual transactions.

Why This Ruling Is a Milestone

In recent years, there has been widespread anxiety within the virtual currency community—since the regulatory adjustments in 2021, many ordinary investors have been panicked by legal risks. Questions like whether regular buying and selling could be deemed “illegal business” have long cast a shadow over market participants’ minds.

The statement from the Shanghai Second Intermediate Court changes this situation. A clear voice from a city at the forefront of China’s financial judicial reform effectively delineates a relatively safe activity scope for individual transactions at the institutional level.

From a regulatory logic perspective, this reflects a maturing judicial mindset:

Refined differentiation replaces a one-size-fits-all policy. No longer is there a blanket denial of all virtual asset trading activities; instead, handling is based on the specific characteristics of each behavior. This demonstrates respect for market realities and legal rationality.

Clarification of law enforcement priorities. Judicial resources will be more targeted toward genuine financial chaos—such as scams involving virtual currencies, Ponzi schemes, and concealment of illegal funds. This is positive for market environment purification.

Alignment with global regulatory trends. Places like Hong Kong, Singapore, and Dubai are advancing the regulation of virtual assets. The emergence of rational voices within China’s judicial system is a natural adaptation to the global development of financial technology.

Clear Risk Boundaries Needed

However, it must be emphasized that this ruling does not declare “all virtual asset transactions are legal,” but rather clarifies what does not constitute the crime of illegal business operations. There is an essential difference between the two.

Absolute lines that must not be crossed:

Be cautious with fiat-to-crypto exchange activities. Especially those with market-maker characteristics or large-scale exchange services remain a focus of regulation and judicial concern, with the highest risk levels.

Ponzi schemes, multi-level marketing scams, and other fundraising frauds are fundamentally organized crimes and are entirely outside the scope of this ruling. Any model promising fixed returns or encouraging recruitment should be firmly avoided.

The legality of fund sources cannot be ignored. Using virtual assets to conceal illegal funds or conduct money laundering is a universal criminal offense internationally and will not change simply because the market is opening up.

Future tax regulations should also be anticipated. Although not yet a law enforcement focus, the tax reporting of individual trading gains will eventually be incorporated into regulatory frameworks.

How Individual Investors Should Respond

What does this ruling mean for investors who have long participated in the virtual asset market?

Adjust your psychological expectations appropriately. There’s no need to constantly feel guilty about “being illegal.” Legitimate market trading is your right, and the law has provided relatively clear confirmation.

But compliance awareness must be strengthened. Understanding the boundaries set by this ruling and remembering those red lines that cannot be crossed are the best protections for yourself.

Knowledge accumulation is always the top priority. Market returns depend more on cognitive level and cycle timing rather than risk-taking spirit. This is especially true in the virtual asset field.

Regulatory frameworks will take time to improve. This judicial case is an important and positive signal, but we are still waiting for higher-level and more comprehensive legal systems. At this stage, maintaining rationality and patience remains necessary.

Insights for the Long-term Industry Development

This ruling reflects a larger shift: from outright prohibition to rational management.

For blockchain technology developers and innovative project teams, this ruling provides a psychological stability expectation. Under compliance, space for innovation is being re-recognized.

For ordinary participants, it is a certain degree of affirmation of market rights. Against the backdrop of diversified global assets, virtual assets have become an unavoidable financial instrument. A rational legal attitude is gradually being established.

For the entire industry, this marks an evolution from simple regulation to refined supervision. The depth and breadth of this evolution will directly influence the long-term ecosystem of this industry within the country.

Conclusion

The statement from the Shanghai Second Intermediate Court embodies mature regulatory wisdom: protecting legitimate market participation and innovation activities while ruthlessly cracking down on genuine financial crimes. It neither stifles development due to overregulation nor condones illegal activities.

The marketization of virtual assets is an inevitable global trend. Simple, blunt bans cannot solve the problem. Precise legal distinctions and enforcement guidance are the foundation for long-term stability.

Although this ruling is just a judicial case, the signals it conveys are very clear: market participants can participate in virtual asset trading more rationally and confidently, as long as they adhere to legal boundaries and maintain compliance awareness. This is undoubtedly a positive move for the healthy development of the entire ecosystem.