Virtual Currency-Based Sale Agreement an Invalid Contract, Chinese Court Rules – Regulation Bitcoin News

The virtual currency can’t be used in the same way as currency on the international market. Therefore, vehicle sales contracts where parties agree that the buyer will pay using a digital currency privately issued by China are invalid. A virtual currency has the legal status of a national currency, but not as a currency.

The law does not protect you

Chinese authorities ruled that vehicle purchase contracts in which buyers would pay with virtual currencies violated administrative and mandatory laws. According to the court, a virtual currency “cannot be circulated in the market as [a] currency.”

As stated in one Chinese language report, the Shanghai court’s ruling was made after an aggrieved vehicle buyer sought the court’s intervention. A report claims that Huang was the buyer. He had signed an agreement to sell his vehicle with Shanghai Automobile Service Co Ltd. in May 2019.

As part of the agreement, Huang would purchase an Audi sports vehicle “with Yurimi as a currency payment.” Upon receipt of 1,281 units of the Yurimi virtual currency, the seller was, as per the agreement, expected to deliver the vehicle. Huang sued the Shanghai Fengxian Court for redress after the seller refused to deliver.

Arguing his case before the court, Huang insisted that Yurimi is a virtual commodity that could be exchanged for goods thus it “does not violate the prohibitive provisions and should be valid.” However, in its counterargument, Shanghai Automobile Service Co Ltd insisted the sale agreement is an invalid contract and therefore should not be protected by the law.

Virtual Currencies Lack ‘Legal Compensation and Compulsion’

In its ruling, the Shanghai Fengxian Court said the country’s token issuance and finance regulations that were implemented in 2017 stipulate that tokens or “virtual currency” used in the financing of token issuance, are not issued by monetary authorities hence they lack attributes such as “legal compensation and compulsion.”

The report also stated that virtual currencies do not enjoy the same legal status and legitimacy as fiat currency. This, therefore, means they “cannot and should not be circulated in the market as a currency.”

The report states that Huang was unhappy with the decision and filed an appeal at Shanghai No. 1 Intermediate Court. However, after reviewing Huang’s appeal, the superior court still ruled to uphold the lower court’s decision.

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Terence Zimwara

Terence Zimwara was a Zimbabwe award-winning journalist and author. His writings have covered the economic problems of several African countries and how digital currency can offer an escape route.