Guangzhou Court: Virtual Currency Loan Contracts Are Invalid, Compensation to Be Based on Acquisition Cost if Unable to Be Returned

BlockBeats News, September 4th: Can a lender sue for losses after lending out cryptocurrency and the borrower fails to return it? The High People's Court of Guangdong Province, China, has issued a typical case.

On July 1, 2023, Chang issued an IOU to Jin, agreeing to borrow 1 unit of cryptocurrency from Jin, to be returned on July 3. If the actual return date has a higher coin price than the lending date, the repayment will be based on the cryptocurrency's value on the actual repayment date or the equivalent in RMB. If the coin price is lower than the lending date, the repayment will be in the equivalent of USDT or RMB at the lending date. If there is a delay, a late payment interest of 24% per annum will be charged from the day of the delay. On July 1, 2023, Jin delivered 1 unit of cryptocurrency to Chang via a certain website, but Chang did not return it on time. It was also found that Jin purchased 1.14 units of cryptocurrency for RMB 228,200 through a certain website. Jin sued, requesting Chang to return the cryptocurrency and compensate for the losses since the due date. If unable to return, compensation should be based on the conversion rate of the cryptocurrency to RMB displayed on the Binance website as of the effective date of the judgment.

The effective judgment of the Guangzhou Intermediate People's Court of Guangdong Province, China, held that the agreement in this case regarding the return of the coin shows that Jin is not responsible for the fluctuation in the value of the cryptocurrency. The higher value between the lending date and the return date should be used to repay the corresponding cryptocurrency or RMB, which essentially guarantees Jin to enjoy the benefits of the cryptocurrency's value fluctuation. If repaid in equivalent RMB, it is, in essence, a cryptocurrency exchange, rendering the return agreement invalid. After the contract is invalidated, any property acquired by one party under the contract should be returned. In this case, it is objectively impossible to return the cryptocurrency. Therefore, the request for cryptocurrency return is not supported, but Chang should compensate Jin for the loss of property. The final judgment ordered Chang to compensate Jin RMB 199,600 for obtaining 1 unit of cryptocurrency, while dismissing Jin's other claims.