Chinese Court Rules Crypto Lending Not Covered by Legal System

A second Chinese court has ruled that the country’s legal system does not apply to crypto lending. According to a press release from the Nanchang People’s Court on October 10, Mr. Ming lent Mr. Gang a total of 80,000 Tether in April 2021 for stablecoin trading.

The loan was expected to be repaid in six months. However, Mr. Gang defaulted on the loan, prompting Mr. Ming to file a lawsuit against his counterpart.

In this week’s landmark decision, the Nanchang People’s Court stated that Mr. Ming was required to prove that Tether is a legally issued fiat currency to bring a necessary cause of action for judicial relief, citing a series of laws that comprise China’s crypto prohibition.

“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.“

As Mr. Ming was unable to do so, the court determined that the lawsuit did not meet the requirements for civil litigation.

Subsequently, Mr. Ming filed an appeal, which was also denied. According to the presiding judge, cryptocurrencies have been illegal in China since late 2021 due to environmental concerns and a lack of surveillance.

The Changzhou Zhonglu People’s Court invalidated a $10 million Bitcoin lending agreement in August, ruling that the lender had no recourse due to the borrower’s delinquency, as crypto-related activities are prohibited in China.