A Chinese Court Rules Crypto Lending is Not Protected by Law
A second Chinese court has made a ruling that deems crypto lending as an activity that falls outside the protection of the country’s legal system. The Nanchang People’s Court released a press statement on October 10th, stating that an individual named Mr. Ming had lent 80,000 Tether (USDT) to another individual named Mr. Gang for stablecoin trading in April 2021. The loan was supposed to be repaid within six months, but Mr. Gang defaulted on the loan, leading Mr. Ming to take legal action.
In its recent landmark decision, the Nanchang People’s Court stated that Mr. Ming needed to prove that Tether is a legally issued fiat currency in order to have a valid cause of action for judicial relief. The court referred to China’s crypto ban legislation and concluded that since Mr. Ming couldn’t prove this, the lawsuit did not fall within the appropriate scope of civil litigation. Mr. Ming appealed the decision, but it was also dismissed.
“There are legal risks involved in participating in virtual currency investment and trading activities. If any legal person, unincorporated organization, or natural person invests in virtual currencies and related derivatives that violate public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them.”
China has banned cryptocurrencies since late 2021 due to concerns about their environmental impact and lack of surveillance. In a previous ruling from August, the Changzhou Zhonglu People’s Court invalidated a $10 million Bitcoin (BTC) lending agreement because crypto activities are prohibited within the country.
Hot Take: Chinese Courts Continue to Reject Crypto-Related Lawsuits
Chinese courts have once again demonstrated their stance on cryptocurrencies by ruling that crypto lending falls outside the protection of the legal system. This decision is in line with China’s ban on cryptocurrencies, which has been in place since late 2021. The courts require individuals involved in crypto-related activities to prove that they are engaging in legally issued fiat currencies to have a valid cause of action for judicial relief.
These rulings highlight the risks associated with participating in virtual currency investment and trading activities in China. It is crucial for individuals and organizations to understand and comply with the country’s regulations to avoid invalidating civil legal actions and bearing potential losses.
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