Introduction
In a recent Bitcoin-related dispute we handled as plaintiff representatives, an investor transferred Bitcoin to a defendant's personal account to fund an overseas blockchain project. When the defendant failed to deliver promised incentive tokens, litigation ensued to recover the transferred cryptocurrency. This case highlights the evolving legal landscape surrounding virtual currencies—a new class of digital assets where judicial interpretations still vary significantly.
Understanding Virtual Currency's Legal Status
Defining Virtual Currency
The European Central Bank characterizes virtual currencies as:
- Unregulated digital money issued by developers
- Used exclusively within specific virtual communities
- Operated through peer-to-peer networks with cryptographic security
Key features include decentralization, anonymity, traceability, immutability, and fixed supply caps.
China's Regulatory Framework
Three pivotal documents shape China's stance:
- 2013 Bitcoin Risk Notice: Recognizes cryptocurrencies as virtual commodities (not legal tender)
- 2017 ICO Risk Announcement: Prohibits token fundraising activities
- 2018 Risk Warning: Cautions against illegal fundraising via blockchain projects
Legal classification under Chinese law:
- Protected as virtual property under Civil Code Article 127
- Not recognized as legal tender or traditional property rights objects
- Judicial practice generally acknowledges virtual currencies' economic value in civil disputes
Common Virtual Currency Dispute Scenarios
1. Transfer Disputes Between Individuals
Courts typically rule that:
- Virtual currency transactions aren't legally protected
- Participants bear inherent risks
- Some judgments declare contracts invalid due to illegality
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Case Example: (2019) Qiong 01 Min Zhong 964
- Court held π币 transactions invalid but allowed restitution
2. Unjust Enrichment Claims
Judges consistently treat virtual currencies as:
- Recoverable assets meeting property return standards
- Compensable despite regulatory restrictions
Landmark Case: (2018) Jing 02 Min Zhong 7176
- Ordered return of 5 Bitcoin overcharges regardless of platform legality
3. Investment-Related Conflicts
Two competing judicial approaches emerge:
| Approach | Rationale | Case Example |
|---|---|---|
| Contract Invalidity | Violates financial regulations | (2017) Xiang 0105 Min Chu 6277 |
| Valid Contract | No direct legal prohibition | (2018) Jing 01 Min Zhong 9579 |
Strategic Recommendations for Legal Practitioners
- Focus on Asset Nature: Emphasize virtual commodity (not currency) characteristics
- Policy Interpretation: Carefully analyze regulatory prohibitions—restrictions target monetary functions, not all transactions
- Private Law Principles: Uphold contract freedom where no clear public harm exists
Future Legal Development Directions
Regulatory Modernization:
- Adopt tiered classification systems
- Implement holder segmentation
- Establish testing standards
International Benchmarking:
- Study U.S. and Singaporean models
- Balance innovation with risk control
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FAQ Section
Q: Can Bitcoin transactions be legally enforced in China?
A: While not recognized as legal tender, courts may enforce transactions framed as virtual commodity exchanges if they don't violate monetary policies.
Q: What happens if a virtual currency platform collapses?
A: Investors may pursue civil claims for asset recovery, though success depends on demonstrating proper asset tracing and legitimate transaction purposes.
Q: Are smart contract disputes treated differently?
A: Currently handled similarly to traditional contracts, with growing recognition of their self-executing nature in evidentiary processes.
Q: How should investors protect themselves?
A: Maintain meticulous transaction records, use verifiable wallet addresses, and avoid platforms operating without proper registrations.
Conclusion
The resolution of virtual currency disputes requires navigating complex intersections between:
- Emerging technology realities
- Evolving regulatory frameworks
- Traditional legal principles
As digital assets continue transforming global finance, legal systems must adapt to ensure:
✅ Investor protection
✅ Market integrity
✅ Innovation facilitation
Future-focused jurisprudence should balance necessary safeguards with flexibility for technological advancement—recognizing that prudent regulation can coexist with progress.