Virtual currencies, as products of information technology development, refer to non-physical currencies issued by non-monetary authorities that exist in digital form using encryption technologies and distributed ledger or similar technologies. Prominent examples include Bitcoin (BTC) and Ethereum (ETH).
In current judicial practice, common disputes related to virtual currency transactions fall into three categories:
- Virtual Currency Purchase Disputes: Buyers pay for virtual currencies (e.g., BTC, ETH) but sellers fail to deliver, breaching contracts.
- Virtual Currency Investment Management Disputes: Entrustors provide funds or virtual currencies to trustees for investment, with agreed returns or guarantees, leading to conflicts over losses.
- Mining Equipment Purchase Disputes: Buyers acquire specialized computers ("miners") to generate virtual currencies, or jointly invest in miners with profit-sharing agreements, resulting in disputes over non-delivery or profit distribution.
Arguments for Contract Invalidity
Defendants often claim these contracts are invalid, citing:
Regulatory Policies:
- The 2013 Notice on Preventing Bitcoin Risks (PBOC et al.) states Bitcoin lacks legal tender status and cannot circulate as currency.
- The 2021 Notice on Further Preventing Virtual Currency Trading Risks (PBOC et al.) classifies virtual currency-related activities as illegal financial operations, subject to strict prohibition and criminal liability if unlawful.
- Public Order Violation:
These policies, while not laws, pertain to financial order and public morality. Under Civil Code Articles 8 and 153(2), contracts violating public morals are void.
Counterarguments for Contract Validity
Contrary to the above, such contracts remain valid if they:
Comply with Laws:
- Virtual currencies qualify as virtual property protected under Civil Code Article 127. No laws explicitly ban their trade.
- Regulatory notices negate virtual currencies' monetary attributes but not their property status. They aren’t deemed prohibited goods.
Target Illegal Activities, Not Legitimate Transactions:
- The 2021 Notice prohibits specific illegal financial activities (e.g., currency exchanges, token offerings, derivatives trading). Routine trades (e.g., buying miners or currencies) without such intent remain lawful.
- Mining restrictions focus on administrative policies (energy use, project approvals), not contract validity.
Judicial Precedents:
Most higher courts uphold contract validity. Examples:
- Beijing High People’s Court (2020): Tripio coin trades, distinct from token offerings, are lawful commodity transactions.
- Shanghai First Intermediate Court (2021): BSN coin sales and miner purchases, absent illegal fundraising, are valid.
Key Takeaways
- Core Keywords: Virtual currency, contract validity, Bitcoin, mining equipment, public order, judicial precedents.
- Legal Basis: Contracts are valid unless directly involving prohibited financial activities.
- Practical Insight: Courts distinguish between speculative trading (banned) and property transactions (protected).
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FAQs
Q1: Are all virtual currency contracts illegal?
A1: No. Only contracts facilitating illegal financial activities (e.g., unlicensed token offerings) are void. Routine purchases or investments may be valid.
Q2: Can miners recover losses if sellers default?
A2: Yes, if the contract is valid. Courts enforce claims for breach, provided the transaction didn’t involve banned practices.
Q3: Does China’s mining ban invalidate equipment purchase contracts?
A3: Not inherently. Contracts remain enforceable unless tied to illegal operations (e.g., unauthorized mining farms).
Q4: How do courts determine "public order" violations?
A4: By assessing whether the activity undermines financial stability or aligns with banned operations (e.g., money laundering).
Q5: Are foreign virtual currency trades treated differently?
A5: Chinese policies primarily target domestic activities. Cross-border trades may face additional scrutiny under forex regulations.
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