Multiple cases prohibit cryptocurrency and RMB settlement, making it more difficult to recover investment losses

Recently, the Shenzhen Intermediate People's Court revoked a ruling made by the Shenzhen International Arbitration Court in 2018. This ruling caused a sensation in the industry at the time, as it confirmed that Bitcoin has property attributes. It was also characterized by the Ministry of Justice as a ruling that "fills the gap in judicial precedents." However, it was revoked by the court two years later because it involved exchange with RMB.

At the same time, the Civil Court of Shanghai No. 2 Intermediate People's Court recently concluded four cases of disputes over commission contracts involving "virtual currency" investment in foreign token issuance and financing projects. The plaintiff entrusted the defendant to invest the Ethereum he held in foreign token issuance and financing projects. The defendant then invested through a domestic third-party company. Later, the company was investigated by the public security organs for suspected criminal offenses, and the whereabouts of the Ethereum invested on behalf of the defendant were unknown. The court also emphasized that there was no basis for calculating investment losses in RMB.

Note: The picture is taken from the official Weibo of the Ministry of Justice

Lawyer Huo used charts to sort out the basic facts of the case:

Yunsilu Enterprise and Gao Zheyu agreed to transfer equity, with 550,000 yuan for 5% equity. Since Gao Zheyu managed the relevant virtual currency for Li Bin and had a certain income, the three parties jointly signed a new "Equity Transfer Agreement", stipulating that Gao Zheyu only needed to pay 250,000 yuan to Yunsilu Enterprise, and the remaining 300,000 yuan would be paid by Li Bin on Gao Zheyu's behalf, and Gao Zheyu would return the relevant virtual currency to Li Bin.

Later, because Gao Zheyu delayed returning the above-mentioned virtual currency, the three parties went to arbitration.

The arbitration tribunal held that Gao Zheyu’s failure to deliver the bitcoins that were mutually agreed upon and considered to have property significance in accordance with the agreement constituted a breach of contract and he should be compensated. Almost all of Yunsilu Enterprise and Li Bin’s requests were supported, except that the US dollar price of the virtual currency involved was adjusted, and it was made clear that settlement could be made in RMB.

To be clear, the court did not deny that Bitcoin has property attributes.

The core reason for the revocation lies in item 3, that is, referring to the public information on the closing prices of BTC and BCH at the time of performance of the contract as published on the okcoin.com website, Gao Zheyu paid Li Bin US$401,780 (settled in RMB according to the USD/RMB exchange rate on the date the ruling was made).

The court believes that the arbitration tribunal's ruling is essentially a disguised support for the exchange and transaction between Bitcoin and legal currency, which violates the spirit of the policy documents. As we all know, whether it is Document No. 289 in 2013 or Document No. 94 in 2017, the exchange and settlement of virtual currency and legal currency are prohibited by the policy. The above arbitration ruling has crossed the "red line" and can only be revoked.

Currency standard or fiat currency standard?

The cryptocurrency community must have a clear understanding of this issue.

The price of currency fluctuates. Should you choose virtual currency or legal currency as your base currency and calculate profit and loss? This is a question that must be considered when investing.

Returning to the field of legal rights protection, due to policy reasons, more and more people in the circle advocate "currency standard". Even when consulting, it is clear that as long as the currency is taken back, it will be fine, and no consideration will be given to converting it into RMB.

As mainstream currencies such as Bitcoin are gradually recognized as virtual property, "currency standard" has become the safest and most secure litigation strategy. Once legal currency is involved, it is likely to be directly rejected by the court.

No way out if you can’t get your coins back?

In the context of "currency standard", a very serious question is, if the other party cannot pay the corresponding amount of virtual currency, will it be equal to nothing? Not necessarily.

In a case in Shanghai No. 1 Intermediate People's Court last year, the court ruled that if the defendant was unable to return the bitcoins involved, the amount of compensation could be calculated based on the price on CoinMarketCap.com at 42,206.75 yuan per bitcoin.

Note: The picture is taken from the WeChat public account of Shanghai No. 1 Intermediate People's Court

The question is, why can this judgment be converted into RMB, but the arbitration award cannot? The reason is simple, it depends on whether both parties agree to the conversion. Civil cases emphasize "autonomy of will", that is, if the two parties reach an agreement, as long as it does not violate the mandatory provisions of the law, the court will respect the choice of both parties.

There is a clear boundary between litigation and arbitration: they are independent of each other and cannot be easily crossed. The court should fully respect the independence of arbitration and supervise arbitration only within a limited scope to avoid excessive interference of judicial power in arbitration.

That is to say, not all arbitration awards can be reviewed by the courts.

Only under certain statutory reasons can it be done. This type of review is mostly a formal review and cannot involve substantive issues of arbitration. What are the so-called formal reviews? For example, are there any procedural problems? Is there any false evidence? Is there no arbitration agreement? Is the arbitrator bent the law for personal gain, etc.

Once a ruling is made to revoke a decision, it must be reported to the local high court or the Supreme Court for review.

Wu Blockchain learned that the Civil Court of the Shanghai Second Intermediate People's Court recently concluded four cases of entrustment contract disputes involving "virtual currency" investment in foreign token issuance and financing projects.

Plaintiffs Wu, Li, Yang, Peng and others entrusted the defendant to invest their ether in foreign token issuance financing projects. The defendant then used a domestic third-party company to invest on their behalf. Later, the company was investigated by the public security authorities for suspected criminal offenses, and the whereabouts of the ether invested on their behalf were unknown. Wu and the other four people sued the defendant to return the ether. In the end, the parties, considering the actual case and their own interests, closed the four cases through mediation or application for withdrawal of appeal.

The Shanghai Second Intermediate People's Court pointed out three major risks in similar cases: First, token issuance and financing is essentially an act of illegal public financing without approval, and the contract involved is difficult to be recognized; second, government departments have clearly stated that token issuance and financing and transactions have multiple risks, including the risk of false assets, the risk of business failure, and the risk of investment speculation, and investors must bear the investment risks themselves; third, "virtual currency" does not have the same legal status as currency, "virtual currency" is not "money", and investors lack a basis for calculating the possible losses of the "virtual currency" they invest in in RMB and other currencies, so it is difficult to determine the losses. (Head image from blokt)