Full Requirements for Cryptocurrency Trials from China's Supreme Court

Source: http://www.baotoulawyer.com/info/6080.jspx

On virtual currency dispute case trial

It should be noted that this is only a comment draft and not a final draft.

The meeting held that the trading hype activities of bitcoin, ethereum, usdt and other virtual currencies seriously disturbed the economic and financial order and seriously jeopardized the property safety of the people. In order to prevent and control the risk of speculation in virtual currency trading, relevant departments of The State Council have successively issued a series of policies and measures, clarifying that virtual currency does not have the status of legal tender, prohibiting the development and participation of virtual currency-related businesses, cleaning up and banning domestic virtual currency trading and token issuance financing platforms. When trying disputes related to virtual currency, the people’s court shall carefully study the adjustment of national financial regulation and industrial regulation and other public policies in different periods, and accurately determine the validity of legal acts related to virtual currency carried out by the parties in accordance with the provisions of the second paragraph of Article 153 of the Civil Code.

83. [Settlement of Disputes over payment consideration with virtual currency] Virtual currency has some attributes of network virtual property. If it is agreed between the parties that a small amount of virtual currency shall be used to compensate the debts arising from mutual exchange, labor service and other basic relations, if there are no other invalid causes, the people’s court shall recognize the contract as valid. Where a party requests the other party to perform the obligation to deliver the virtual currency, the people’s court may provide support; If the party who pays the virtual currency cannot actually perform the contract due to relevant policy restrictions or other reasons, the scope of compensation can be determined according to the actual value of the property accepted by the party who agrees to pay the virtual currency when the contract is signed. Where a party uses virtual currency as a regular payment instrument to exchange legal tender or physical commodities under the guise of a basic transaction contract, the people’s court shall determine that the contract is invalid.

84. [Hearing of Disputes over Entrusted Investment in Virtual Currency] The parties agree in the contract that the client shall register an account on the virtual currency trading platform in its own name and entrust the trustee to engage in investment activities; Or if the principal directly delivers the funds to the agent and the agent manages the investment in its own name or in fact in the name of another, the parties may be deemed to have entered into an entrusted investment contract. If the contract is signed after the Announcement on Preventing the Financing Risks of Token Offering (September 4, 2017) is issued, the people’s court shall determine that the entrustment contract is invalid because the agency matters are illegal. As for the loss suffered by the principal, the cause of the entrustment may be taken as the main factor to determine the degree of fault, which shall be shared by the parties.

85. [Dispute related to “mining”] Virtual currency “mining” refers to the process of producing virtual currency through the calculation of a special “mining machine”. From the hearing of the case, the disputes caused by “mining” can be summarized into two types. One is that the parties purchase and lease the mining machine that produces virtual currency in order to obtain virtual currency through mining activities, and the dispute occurs due to the payment of the mining machine. One is the cooperation mode that integrates the mining machine trading, cooperative sharing or custody service and other multiple legal relations. For example, both parties jointly invest to buy the mining machine and agree to share the money after obtaining the virtual currency. Later, disputes are formed due to the seller’s failure to deliver the goods or share the money. Due to its large energy consumption and carbon emissions, low contribution to the national economy, and limited driving effect on industrial development and scientific and technological progress, “mining” activities are gradually under strict control and orderly withdrawal. When trying a case, the people’s court should reasonably balance the rights and obligations between the parties according to the influence of public policies on the performance of the contract in different periods. Prior to the release of the Circular on cracking down on virtual currency “mining” activities (September 3, 2021), the national policy did not explicitly prohibit mining activities. The people’s court shall not support the previous contract agreed upon by the parties for the sale, leasing, storage of “mining machine” or additional provision of relevant operation management, technology development and other services, and in the litigation request for confirmation of the invalidity on the grounds that the subject matter of the contract or the purpose of the contract is illegal. If the contract cannot be subsequently performed due to the promulgation of the policy, and one of the parties proposes to terminate the contract, the people’s court shall support. After the termination of the contract, performance shall be terminated if it has not been performed; If performance has been performed, the parties may, depending on the circumstances of performance and the nature of the contract, request restitution or other remedial measures and shall have the right to claim compensation for losses. The People’s court shall certify that any contract after September 3, 2021, in which the parties agree to buy, sell, lease, keep the mining machine or provide additional services such as operation management and technology development, is invalid. In the trial of a case, if one party brings a lawsuit to confirm the validity of the contract and requests to continue to perform the contract, and the other party claims that the contract is invalid, or if one party brings a lawsuit to confirm the validity of the contract and return the property, and the other party claims that the contract is valid, the people’s court shall clarify to the plaintiff the modification or addition of the claims, or clarify to the defendant the simultaneous performance defense, so as to settle the dispute once and for all. If a party changes the claim or raises a defense in accordance with the interpretation, the people’s court shall summarize it as the focus of the dispute in the case and organize the parties to fully provide and cross-examine evidence.

86. [Dispute Case between Users and Virtual Currency Trading Platform] If users register and participate in virtual currency trading on the virtual currency trading platform before the release of Notice on Preventing the Financing Risks of Token Issuance (September 4, 2017), and the trading platform fails to perform the service agreement and causes losses, they shall be liable for breach of contract to the users according to law. If the user is also at fault for the occurrence of the loss, the corresponding amount of compensation for the loss may be reduced. If users register and participate in virtual currency trading on the virtual currency trading platform after the Announcement on Preventing the Financing Risks of Token Offering (September 4, 2017) is released, and file a civil lawsuit with the people’s court on the grounds that the trading platform or the virtual currency issuer fails to fulfill the liquidation obligation and causes losses, the people’s court shall rule that the case is not accepted. Inform them to apply to the relevant departments for processing.

87. [Sentencing and Enforcement Issues] With respect to the litigant’s claim for the delivery or return of Bitcoin and other “virtual currencies”, the people’s court shall ascertain the holding status of the virtual currencies, clarify whether there is the possibility of delivery or return, and specify it in the documents. If it is ascertained after hearing that the property rights and interests cannot be returned or delivered, the parties concerned shall be guided to make reasonable claims and encouraged to reach an agreement on the property rights and interests. If, after hearing, it is found that the virtual currency has the basis for actual performance, the people’s court shall clearly deliver or return the virtual currency in the judgment according to the request of the party concerned. If the party who has the obligation to deliver or return the virtual currency refuses to perform the obligation determined by the effective judgment, the people’s court may take corresponding measures in accordance with the relevant provisions of the Civil Procedure Law enforcement procedure.

88. [Economic disputes involve the handling of economic crimes] In handling civil and commercial cases, if the people’s court finds that the perpetrator is suspected of illegal raising of funds, illegal issuing of securities, illegal selling of token notes and other economic crimes involving all parties in the name of financing by token issuance or engaging in virtual currency financing and other asset management activities, it shall promptly transfer the criminal clues to the investigation authorities. Before the investigation organ makes a decision to file a case, the people’s court shall suspend the hearing; After a decision has been made to file the case, an order shall be made to reject the suit; If the investigation organ fails to file a case in time, the people’s court may, when necessary, report the case to the Party Committee’s Political and Legal Affairs Commission for coordination and handling. The people’s court shall accept the civil disputes arising from the non-operational “virtual currency” transaction or compensation behavior of the parties based on the basic legal relationship, which has nothing to do with the economic crimes of the above-mentioned stakeholders.