NowShenzhen | May 10, 2022
Last week, Jingsh Shenzhen Lawyer received a consultation from Mr. G from Italy about the international sale of goods. He met Mr. Lei from a Chinese company online through the Facebook platform. Through WeChat communication, the two parties reached an agreement on the sale of GPUs， issued a proforma invoice to Mr. G in the name of Mr. G, instructing Mr. G to pay USDT equivalent to US dollars to a string of digitally formed addresses. After Mr. G paid, Lei did not deliver the goods within three days as agreed in the contract, but delayed using various excuses. After two months, G had no choice but to find a lawyer for help.
The gentleman provided us with the following materials: a proforma invoice without signature and seal with the information of the goods, the amount of the payment and the USDT address instructed to pay, as well as Lei’s contact information; two photos of Lei and his WeChat address. G couldn’t even provide Lei’s real name, let alone his identity. We tried to contact Lei with the address in the the proforma invoice, but the phone couldn’t get through, nor did the WeChat number. When the identity of the other party cannot be determined, it is very difficult to file a lawsuit in China. Even if Lei’s identity information is obtained through the court’s investigation order and the case can be prosecuted in the court, whether the USDT payment method can be supported by the Chinese court? In China’s current judicial practice, there is controversy over how virtual currencies are identified. In the well-known complex international environment, international trade payment has become the focus of disputes, and the closure of PayPal’s Chinese customer accounts in the previous period also attracted attention. In some international goods transactions, it has become an unavoidable legal issue for buyers and sellers to communicate and agree to adopt virtual currency payment as payment for goods. How to determine the nature of virtual currency in Chinese law, and how to deal with related issues in China’s judicial practice, it is necessary for us to discuss here.
First, the “Notice on Preventing Bitcoin Risks” issued by the People’s Bank of China in December 2013. Among them, when defining the attributes of Bitcoin, it is mentioned: “In nature, Bitcoin should be a specific virtual commodity, which does not have the same legal status as currency, and cannot and should not be used as currency in the market..” The nature of other virtual currencies is comparable to Bitcoin, virtual currencies do not have circulation properties, and virtual currencies are prohibited from participating in illegal financial activities, but the law does not prohibit all trading activities with virtual currencies as the target. According to the opinion in the latest arbitral award of the Beijing Arbitration Commission, the arbitral tribunal believes that the virtual currency, including the bitcoin in this case, is virtual property and is protected by law. Virtual currency can be regarded as a virtual property protected by law.
However, in practice, cases involving virtual currency disputes belong to emerging fields. There are great differences in the judgment ideas of various courts and arbitration institutions across the country. The phenomenon of “different judgments in the same case” is not uncommon in judicial practice. The appeals of the relevant cases are not supported, and the judgment of the contract is illegal and invalid, and the trial that each bears the loss is the mainstream. Many courts in Beijing and Shanghai recognize that virtual currencies such as bitcoin have the attributes of virtual property, while more local intermediate people’s courts do not recognize the property attributes of virtual currencies other than bitcoin.
On the other hand, cases related to virtual currency face difficulties such as difficulty in obtaining evidence and difficult judicial procedures. Due to the technical nature of virtual currency, information barriers, extraterritorial evidence collection and inconsistent identification standards will be involved in the case handling, Freezing, how to deal with it, etc. are all practical issues, so even if there is an effective judgment, it is a problem if the return is enforced.
Take the mainland’s first case of revocation of an arbitration award involving Bitcoin [(2018) Yue 03 Minte No. 719] as an example: On December 2, 2017, an agreement signed by the parties stipulated that Gao would remove Li in three phases, all the digital currency assets (20.13 bitcoins, 50 bitcoin cash, 12.66 bitcoin diamonds) entrusted to him for financial management were returned to Li’s e-wallet. As a result, after the agreement was signed, Gao failed to perform his contractual obligations. Li then applied for arbitration to the Shenzhen Arbitration Commission according to the arbitration clause in the agreement, claiming that Gao should return the US dollars and interest equivalent to the above-mentioned digital currency assets. After hearing, the arbitral tribunal held that Gao’s failure to deliver the bitcoins, etc., which were mutually agreed upon by both parties and deemed to have property significance, constituted a breach of contract and should be compensated. However, Gao then sued the Shenzhen Intermediate People’s Court, requesting the Shenzhen Intermediate Court to revoke the above-mentioned arbitral award. The Shenzhen Intermediate People’s Court cancelled the arbitral award because the arbitral award violated the public interest, This means that Lee’s interest in bitcoin has not actually been supported.
So can it be considered that virtual currency cannot be used in China? It is not always the case. At present, in judicial practice, the courts hold a more positive and open attitude towards the protection of big data and virtual property, that is, as long as these data and virtual property are obtained by enterprises through If the legal and legitimate business activities are obtained without harming the legitimate rights and interests of others, the court will generally recognize and protect the commercial interests obtained by the enterprise. In the case mentioned above, in order to obtain legal goods, Mr. G paid the corresponding consideration in USDT, which should be protected by law.
In order to better ensure the safety of international trade, lawyer Zhao Baolian, director of the import and export legal affairs department, makes the following suggestions to overseas buyers:
1、 You need to know who you are dealing with, if it is a company, ask for the business license of the company, if it is an individual, ask for a copy of the ID card, these are not excessive requirements.
2. It is necessary for overseas buyers to sign a contract with the transaction party if there is no platform guarantee (if you signed a contract through Alibaba, the platform has arranged both parties to sign the digital contract on line). If the party to the contract is a company, please sign the contract and affix the company’s seal. The official contract of a Chinese enterprise must be signed by the company with the signature of the legal representative, the signature must be in Chinese.
3. If the two parties must negotiate to pay in virtual currency, please confirm the owner of the account while providing the payment address, and lock the price of payment, so that there is a basis for refund in the event of a dispute.
Of course, the safe transaction mode is still to ensure that the party who signed the contract, the issuer of the proforma invoice, and the recipient of the payment account, all the information is consistent, the payment method is currency transaction or letter of credit transaction, Party background checks, etc., to ensure maximum transaction security.