A Chinese court has ruled that a vehicle purchase agreement in which the buyer agreed to pay in privately issued digital currency is void because virtual currency cannot circulate in the market as currency. The court argued that virtual currency does not have the same legal status as the country’s fiat currency.
not protected by law
A Chinese court ruled that a vehicle purchase agreement in which the buyer agreed to pay in virtual currency violated mandatory provisions of law and administrative regulations and was invalid. According to the court, virtual currency “cannot be circulated in the market (as currency).”
As noted in oneChinese reportthe Shanghai court’s ruling came after a disgruntled vehicle buyer asked for the court’s intervention. According to the report, the buyer, identified only as Huang, had signed a purchase agreement in May 2019 with Shanghai Automotive Service Co.
As part of the agreement, Huang was to purchase an Audi sports car “using Yurimi as currency payment.” Upon receiving 1,281 units of the virtual currency Yurimi, the seller was to take delivery of the vehicle in accordance with the contract. However, when the seller failed to deliver, Huang sought relief through the Shanghai Fengxian Court.
Huang argued his case in court, arguing that because the Lily Mei was a virtual commodity that could be exchanged for merchandise, it “did not violate the prohibition and was valid.” In its counter argument, however, Shanghai Automotive Service Co. argued that the purchase agreement was an invalid contract and should not be protected by law.
virtual currency lacks “legal compensation and enforceability”
. In its ruling, the Shanghai Fengyun Court stated that the country’s token issuance and financial regulations, which came into effect in 2017, lack attributes such as “legal compensation and enforcement” because the tokens or “virtual currencies” used to finance token issuance are not issued by the monetary authority.
Additionally, such virtual currencies do not have the same legal status as national fiat currencies, the report said. As such, they “cannot and should not be allowed to circulate in the market as currency.”
According to the report, Huang appealed the decision to the Shanghai First Intermediate Court of Appeals. However, after considering Huang’s appeal, the Superior Court still ruled in favor of the lower court’s decision.
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