- A Chinese court has ruled that a Filecoin mining contract is invalid as it violates the principles of green development and social and public interests.
- Currently, most civil contracts involving cryptocurrency and mining are not recognized by Chinese courts and are considered invalid.
- China continues to deliver conflicting decisions regarding contracts involving cryptocurrencies.
China’s stance on cryptocurrencies remains inconsistent, with a recent court ruling declaring a Filecoin mining contract invalid due to its violation of green development and social and public interests principles.
China’s Cryptocurrency Conundrum
Despite its crackdown on cryptocurrencies in 2021, China continues to deliver conflicting decisions on the matter. The latest development involves a Chinese court ruling that a Filecoin mining contract is invalid as it violates the principles of green development and social and public interests. At present, most civil contracts involving cryptocurrency and mining are not recognized by Chinese courts and are deemed invalid.
While there have been court rulings that recognize and accept cryptocurrencies as property, this latest move has caused confusion. Despite the government’s stance, investors in the Chinese region continue to invest through international companies or over-the-counter (OTC) trading. The Chinese region, representing one of the largest investor groups, still harbors active traders. As seen in the FTX crash, a significant portion of the affected investors were traders residing in China.
Cryptocurrency Court Ruling
The People’s Court of Wuchang District, Wuhan City, convened due to a dispute in a contract dated July 7. The plaintiff, Zhou, purchased an IPFS storage server at a price of 179,800 yuan, which was to be hosted by the company. The server rental company promised Zhou a Filecoin reward greater than his monthly payments. However, when cryptocurrencies were banned, Zhou contacted the company to request a refund of his payment. As no agreement was reached, the July 7, 2021 contract was taken to court.
The court stated that the plaintiff applied for this rental service to obtain Filecoin and that mining is banned in the country. The court ruled that such mining activities do not contribute to the country’s carbon emission targets and pose risks such as asset loss, speculation, and potential failure, which harm public interests. Therefore, the contract in question was ruled invalid.
On September 15, several institutions including the People’s Bank of China issued a document titled “Notice on Preventing Fraud Risks in Virtual Currency Transactions and Coping with These Risks”, advising citizens to stay away from crypto.
Conclusion
China’s inconsistent stance on cryptocurrencies continues to cause confusion among investors and traders. While some court rulings recognize cryptocurrencies as property, others deem contracts involving crypto and mining activities as invalid. This inconsistency reflects the ongoing struggle to regulate the burgeoning cryptocurrency industry in the country.
