Key Takeaways
- As per a Chinese court, a vehicle contractual agreement in which the buyer decided to pay in a digitally produced form of money is void because a virtual currency cannot flow freely in the market as a currency.
- According to the court, virtual money does not have the same legal standing as national fiat currency.
- According to the Shanghai Fengxian Court’s decision, the country’s token issuance and financial management rules, implemented in 2017, state that tokens or virtual money used during token issuance financing are not issued by monetary authorities, and thus lack legal reimbursement and coercion.
A Chinese court ruled that a vehicle contract for the sale in which the buyer offered to pay in virtual currency was unworkable because it breached legally required segments of laws and administrative rules.
A virtual currency, as per the court, “cannot be circulated in the market as [a] currency.”
According to the document, the Shanghai court’s decision came after an incensed vehicle buyer requested the court’s help. In May 2019, a buyer only recognized as Huang agreed to sign a deed of sale with Shanghai Automobile Service Co Ltd.
As part of the contract, Huang agreed to purchase an Audi sports car “with Yurimi as a monetary payment.” As shown in the contract, the seller was expected to deliver the automobile after receiving 1,281 units of Yurimi virtual money. Huang, on the other hand, went to the Shanghai Fengxian Court to seek reparation after the seller failed to implement.
Both sides agreed to use Yurimi as a payment option, rather than legal tender, for transactions. The property value and use valuation of virtual currency, on the other hand, cannot be approximated, and the car, as the consideration, is a well-known property with a specific use value. This case should not be classified as a reciprocal contract under the principle of fairness in civil law.
Huang argued in court that Yurimi is a virtual commodity that can be given in return, and as such, it “does not violate the prohibitive provisions and should be valid.” Shanghai Automobile Service Co Ltd, on the other hand, argued that the selling contract stands null and void which should not be legally protected.
The country’s legal currency is RMB, according to the “People’s Bank Law.” Furthermore, the “Announcement of the People’s Bank of China, the Central Internet Information Office, the Ministry of Industry and Information Technology, and Others on Preventing the Risk of Token Issuance and Financing,” which was issued and executed in September 2017, states:
“Token issuance financing refers to the financing of financing entities through tokens.” Illegally selling, circulating, and raising funds from investors in so-called “virtual currencies” like bitcoin and ether is primarily unauthorised public financing without authorization.
The judge remarked, according to the legal and regulatory requirements, virtual currency has the following criteria:
- it is issued by non-monetary authorities
- it uses encryption technology
- it uses distributed account or similar technology
- it is available in digital form
- It cannot be used as currency in the market.
The exchange and sale of virtual currency, the assistance of virtual currency matching services, the issuance of tokens, and the trading of virtual currency derivatives are all illegal economic activities. As a result, virtual currency transactions are fraught with danger and should be approached with caution.
