No legal cover for crypto lending in China.
A Chinese court has confirmed that activities related to crypto lending won't be under the umbrella of legal safeguards. This is another blow to cryptocurrency advocates in China, where digital assets have been banned.
A recent press release from the Nanchang People's Court highlighted a dispute between two individuals identified as Mr. Ming and Mr. Gang.
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Mr. Ming had loaned 80,000 Tether (USDT) to Mr. Gang for stablecoin trading. After Mr. Gang failed to repay the loan, Mr. Ming sought to rectify the situation through legal channels. However, the court was not sympathetic to his dilemma.
In the landmark ruling, the court stated that Mr. Ming needed to prove that Tether constituted a legally recognized fiat currency to be eligible for legal recourse. Given Mr. Ming's inability to do so, the case was deemed incompatible with the criteria for civil legal actions.
Following an unsuccessful appeal, the court's position remained unchanged. The presiding judge offered a stern caution, stating:
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.
It's worth noting that China has implemented an extensive ban on crypto since 2021. Citing environmental issues and regulatory compliance as major reasons, the ban was widely anticipated but still marked a pivotal moment.
Before this recent ruling, another court in China, the Changzhou Zhonglu People's Court, had also declared a $10 million Bitcoin lending contract legally unenforceable, thus signaling a pattern of judicial stances against crypto lending.
This recent verdict by the Nanchang People's Court serves as yet another example of the challenging regulatory environment that cryptocurrencies face in China. It further invalidates the legal status of crypto lending within the country. It serves as a cautionary note for the global cryptocurrency community, alerting them to the labyrinth of legal issues that can accompany digital asset transactions in different parts of the world.
