Background
A Chinese court has made a significant ruling that declares crypto lending to be outside the protection of the country's legal system. This is the second landmark ruling of its kind in China.
The Case
In April 2021, an individual named Mr. Ming lent 80,000 Tether (USDT) to another individual named Mr. Gang for stablecoin trading. The loan was supposed to be repaid within six months. However, Mr. Gang defaulted on the loan, prompting Mr. Ming to take legal action in the Nanchang People's Court.
The Ruling
The Nanchang People's Court stated that Mr. Ming needed to prove that Tether is a legally issued fiat currency in order to bring a valid case for judicial relief. The court cited the Chinese Crypto Ban legislation as the basis for its decision. Since Mr. Ming was unable to provide such proof, the court ruled that the lawsuit did not fall within the scope of civil litigation. Mr. Ming appealed the decision, but his appeal was also dismissed.
The presiding judge emphasized that there are legal risks associated with participating in virtual currency investment and trading activities. Any investments in virtual currencies that violate public order and good customs will render any resulting civil legal actions invalid, and the losses will be borne by the investors.
China's Cryptocurrency Ban
China has banned cryptocurrencies since late 2021, citing concerns over environmental impact and a lack of regulation. This ruling is consistent with the country's stance on crypto-related activities.
Previous Ruling
In a similar ruling in August, the Changzhou Zhonglu People's Court invalidated a $10 million Bitcoin lending agreement. The court concluded that the lender had no legal recourse due to the borrower's default, as cryptocurrency is considered a prohibited activity in China.
Implications
These rulings demonstrate China's strict approach to cryptocurrencies and related activities. They highlight the legal risks involved in investing and trading virtual currencies within the country. Individuals and organizations need to be aware of the legal restrictions and potential consequences before engaging in such activities.
Source
Magazine: 6 Questions for JW Verret — the blockchain professor who’s tracking the money
