Can I be sued for lending Bitcoin virtual currency to others?

As the saying goes, it is only natural to pay back debts. Everyone is familiar with private lending. However, in the field of virtual currency, this simple principle does not always seem to be well implemented.

Not long ago, a client consulted Mankiw: one of his friends urgently needed USDT Tether when conducting contract transactions. He hoped that the client would lend USDT and agreed on a return period. Afterwards, his friend seemed to be indifferent to the return and always prevaricated with various reasons. After many unsuccessful communications, the client hoped to resort to court to resolve the matter.

Originally thought to be a simple private loan dispute, however, the client filed cases in his own place of residence, the defendant's place of work and life, and his friend's place of residence, but all were rejected. If you don't pay back the virtual currency you lent, can you get it back? In this article, we will talk about this topic.

0 1Does the law regulate digital currency lending?

The first issue in cases related to lending virtual currency is filing a case. The reason why the client who came to consult this time was not filed in his own place of residence and the defendant's place of work and life was the issue of jurisdiction. Putting aside the procedural issues for the time being. In the defendant's place of residence, the reason why the court did not file the case was that this case did not fall within the scope of the court's civil acceptance.

After searching, it is believed that the issue of virtual currency lending does not fall within the scope of civil acceptance of the courts and is not an isolated case. There are precedents of dismissing lawsuits in Kunming City, Yunnan Province [1], Baishan City, Jilin Province [2], Beijing City [3], Xi'an City, Shaanxi Province [4], Changzhou City, Jiangsu Province [5] and other places.

These cases of dismissal of prosecution and non-acceptance of cases at the time of filing are essentially cases that have not been substantively examined by the court, and the court believes that the matter is not under its jurisdiction . The main reasons for the determination are basically the same, namely:

1. According to the Notice on Further Preventing and Dealing with the Risks of Speculation in Virtual Currency Transactions, my country has banned the exchange of virtual currencies such as Bitcoin with legal tender, and also banned foreign virtual currency exchanges from providing services to Chinese residents via the Internet. The relevant transactions are invalid as they violate public order and good morals.

2. The relevant virtual currencies are operated by overseas platforms; they do not have the attributes of a kind of object, are not realistically returnable, cannot be quantified using legal currency, and lack legitimate economic evaluation standards.

Don’t be impatient when you see this. Despite the above cases that were not accepted, we found in the search that there were relatively more cases that were filed and substantive trials were conducted. At the same time, judicial practices vary greatly from place to place, and even the trial ideas in the same province may “fight”. For example:

In the same case involving the return of Bitcoin, after the parties appealed, the Baicheng City People's Court of Jilin Province believed that the case fell within the jurisdiction of the People's Court and ruled that the case should be heard by the lower court. [6] However, the Baishan City People's Court of Jilin Province believed that the case did not fall within the jurisdiction of the court and revoked the substantive judgment of the first instance court. [7]

Therefore, if you encounter obstacles at the stage of filing a case, it is still necessary to "argue" with the court and strive to enter the "door" of substantive trial. Specifically, if you receive a ruling from the court to dismiss the lawsuit, you can submit an appeal to the court higher than the first instance court.

0 2How does the law regulate digital currency lending?

After the case is filed, the next thing to consider is how the court will adjudicate the case. After searching, the views of courts in various places are mainly as follows:

1. Order to return virtual currency: Virtual currency is virtual property. The virtual currency lent by the parties has the attributes of virtual property and should be protected by law. (Beijing, Shanghai, Wuhan, Hubei, etc.) [8]

2. Order to return RMB: The parties confirmed the RMB value of the virtual currency by discounting the virtual currency into RMB, and the money should be returned in accordance with the agreement between the two parties. (Shenzhen City, Guangdong Province, Bengbu City, Anhui Province, Chengwu County, Shandong Province, etc.) [9]

3. The contract is deemed invalid and the risk is borne by the party: Virtual currency is not a real currency and cannot and should not be used as currency in the market, let alone as the "subject matter" of a loan contract. Virtual currency transactions disrupt the economic and financial order, violate public order and good customs, and violate the public interest. The act is invalid. (Xiamen City, Fujian Province, Nanyang City, Henan Province, etc.) [10]

0 3They are both loans, why are the judgments different?

Seeing the different opinions of different local courts above, are you a little confused? How can different courts have different opinions on the same matter? Which one should be followed? In fact, this question is not difficult to understand.

First of all, although it is all about lending virtual currency, in specific cases, due to the different transaction backgrounds, the agreement between the two parties, and the evidence materials, it may seem like the same thing, but in fact it is a different legal relationship.

Secondly, there are relatively few legal provisions on virtual currency in my country, only some notices, announcements and risk warnings issued by the People's Bank of China and other ministries and commissions. Although the nature of virtual currency has been determined through these normative documents, there is still a lot of room for discussion at the legal level. For example: whether the transaction of virtual currency violates public order and good morals, whether the lending of virtual currency should be subject to the rules of private lending or the rules of returning the original property... In the absence of perfect laws and regulations, the judges have a lot of discretion.

Finally, courts in different regions have different understandings of virtual currency cases. Such differences may be affected by factors such as the specific circumstances of the case, the region where it is located, different courts or judges, and trial time , leading to different judgments.

In the future, through the continuous deepening of legal research, the continuous accumulation of judicial practice, and the continuous improvement of the legislative system, relatively consistent precedents and judgment standards will gradually be formed, providing clearer guidance for judicial practice and people's behavior.

0 4 Lawyer advice

Although there are great differences in judicial practice in different regions, many courts in Beijing and Shanghai have recognized that virtual currencies such as Bitcoin have the attributes of virtual property. More and more cases support the return of virtual currencies. In similar situations, Attorney Mankiw reminds you to pay attention to the following points:

1. Keep relevant transaction records, loan notes, parties’ identity information and other materials so that they can be used as evidence in litigation;

2. The parties can try to reach a new agreement and turn the relevant transaction into a traditional private lending legal relationship, which will increase the probability of successful rights protection;

3. It is difficult to file a case online. You can communicate with the judge of the case filing court offline to increase the chances of filing a case.

4. If you encounter difficulties in filing a case, you can protect your rights and interests through legal means such as appeal, supervision application, and prosecutorial recommendation.

Finally, I hope everyone can protect their own property and surf Web3.0 safely. If you have any questions, please feel free to contact Attorney Mankiw privately.

Related referees

【1】【(2023) YUN01 MINZHENG 2322】

【2】【(2022)Ji06MinZhongNo.236】

【3】【(2021)京0105民初78237号-1】

【4】【(2020)Shaan01MinZhongNo.11210】

【5】【(2020) Su0404 Minchu No. 3407】

【6】【(2021)Ji08MinZhong1014No.】

【7】【(2022)Ji06MinZhongNo.236】

【8】Related cases: Beijing [ (2022) Jing01 Minzhong No. 5972], [(2021) Jing0105 Minchu No. 57372], Shanghai [(2020) Hu0113 Minchu No. 23704], [(2021) Hu0151 Minchu No. 2896], and Wuhan City, Hubei Province [(2020) E0102 Minchu No. 1574].

【9】Related cases: Shenzhen City, Guangdong Province (2020) Yue 03 Min Zhong No. 9544, Bengbu City, Anhui Province [(2020) Wan 0304 Min Chu No. 343], Chengwu County, Shandong Province [(2020) Lu 1723 Min Chu No. 1096].

【10】Related cases: Xiamen City, Fujian Province (2020) Min 0203 Min Chu 21651), Nanyang City, Henan Province [(2020) Yu 13 Min Zhong 1599].