Crypto lending activity still falls outside the purview of China’s legal system, ruled a Chinese court in the second ruling of the nation’s kind on Tuesday.
Per a press release from the Nanchang People’s Court, lending out virtual currency and requesting a return “is not within the scope of civil litigation.”
“Virtual currency is different from digital RMB,” said the judge for the related lawsuit, according to a Google-translated version of the press release. Digital RMB is a central bank digital currency (CBDC) issued by the Central Bank of China that is redeemable for banknotes and coins.
“Virtual currencies only exist in digital form, are not legal tender, and do not have legal compensation, such as Bitcoin, Ethereum, Tether, etc., and cannot be used as currency in the market,” the judge continued.
The case pertained to an individual identified as “Mr. Ming,” who lent 80,000 USDT to “Mr. Gang,” for stablecoin trading, in the interest of earning yield. The latter failed to pa back his loan, however, prompting a lawsuit from the former.
However, since USDT wasn’t determined to have been a currency issued in accordance with the law, the court did not consider it legally compensable. Mr. Ming attempted to appeal the decision, though this too was dismissed.
The judge highlighted the illegal nature of crypto transactions at large in their ruling, echoing the central bank with claims about crypto harming “national financial order,” and “social public interests.” They continued:
“If any legal person, unincorporated organization, or natural person invests in virtual currencies and related derivatives that violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses shall be borne by them themselves.”
China’s Crypto Ban
After banning Bitcoin mining in May 2021, China’s central bank enacted a sweeping ban on all crypto transactions in September of that year, citing concerns over economic instability and criminal activity.
China continues to attract significant crypto volume. Chainalysis reports that the region received $86.4 billion in transactions between July 2022 and June 2023. Chainalysis and others argue that such bans in China have been either ineffective or loosely enforced.
Though mining activity in China has substantially fallen, estimates from Cambridge show that the nation still hosted over 20% of the globe’s share of Bitcoin mining activity several months after the mining ban was enacted.
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