China's Supreme Court rules that crypto transactions constitute “illegal fundraising”; violators face up to 10 years in prison and fines of up to $79K
Eliza Gkritsi / CoinDesk :
Context & Ripple Effects
China had already prohibited companies from raising money through ICOs in its 2017 ICO crackdown, while police later arrested more than 1,100 people in a crypto-related money-laundering sweep. The Supreme Court’s ruling moves the treatment of crypto activity from administrative prohibition toward a clearly defined criminal exposure.
The decision also sharpens a split in China’s legal posture: its courts had recognized blockchain records as admissible digital evidence even as enforcement targeted crypto-linked fundraising and laundering.
First-order effects
- People found to be conducting crypto transactions classified as illegal fundraising now face the ruling’s stated prison terms and fines, giving Chinese enforcement authorities a more severe legal basis for action.
- Crypto fundraising operators face a direct escalation beyond the earlier ICO ban, as the Supreme Court’s classification attaches criminal penalties to the conduct.
Second-order effects
- Police investigations like the earlier crypto-related money-laundering arrests gain a judicial framework that can increase pressure on intermediaries handling transactions connected to fundraising.
- Chinese crypto businesses and users must distinguish blockchain applications from transactions that authorities treat as fundraising, raising compliance risk for services built around token flows.
Third-order effects
- The ruling points to a durable Chinese policy divide in which blockchain can retain limited legal utility while crypto financial activity is progressively excluded from legitimate commerce.
- If later enforcement follows this legal framing, China’s crypto market will be shaped less by platform-level restrictions than by criminal-law risk for participants and transaction facilitators.
The trend: China is formalizing a crypto legitimacy gap: permitting selected blockchain uses while treating token-based financial activity as an enforcement target.