In another significant legal development related to cryptocurrency in China, a second court has ruled against cryptocurrency lending, stating that this activity is not protected under Chinese law. The Nanchang Municipal People's Court issued a press release on October 10, detailing the case in question. In April 2021, an individual named Mr. Ming lent a total of 80,000 Tethers, a type of stablecoin, to another individual named Mr. Gang, with an agreement that the loan must be repaid within six months.
However, when Mr. Gang failed to repay the loan, Mr. Ming took the matter to court. In a groundbreaking ruling, the Nanchang People's Court stipulated that Mr. Ming had to prove that Tether is legally recognized as legal tender before he could pursue any legal action for relief. The court cited existing legislation governing China's cryptocurrency ban. Since Mr. Ming could not provide such proof, the court declared that the case did not fall within the appropriate scope for a civil action. Following this decision, Mr. Ming filed an appeal, but this too was dismissed. The presiding judge emphasized that engaging in virtual currency investment and trading activities carries legal risks, and any investments that violate public order and good customs render related civil legal proceedings invalid, with losses to be borne by the investor.
China has prohibited cryptocurrencies since late 2021 due to environmental concerns and a lack of regulation. In a previous ruling in August, the Changzhou Zhonglu People’s Court invalidated a $10 million Bitcoin loan agreement, determining that the lender had no legal recourse for the borrower's default due to the prohibition of cryptocurrencies in the country.
These rulings reflect the Chinese government's strict stance on cryptocurrency and its efforts to curb cryptocurrency-related activities within its jurisdiction. As a result, individuals and entities engaging in cryptocurrency lending and trading activities in China continue to face significant legal and financial risks.
