China’s Jiangsu Provincial High People’s Court recently made headlines with the release of information regarding a foreign-related case involving a cryptocurrency contract gone awry. The case involved a 15.74M yuan dispute between Singaporean investor, Pan Moumou, and Chinese citizen, Tian Moumou.
Cryptocurrency regulation in China has always been stringent. Despite allowing citizens to own and trade digital currencies, the country does not recognize these assets as legal tender. Consequently, Chinese laws dictate that any risks associated with cryptocurrency contracts are the responsibility of the parties involved, with no legal protection offered. This was particularly evident in the Pan and Tian case, given its international nature.
The dispute stemmed from an investment partnership between Pan Moumou and Tian Moumou in the “MFA Blockchain” project in 2019. Pan provided 15.74M yuan towards the project, expecting Tian to manage the technology and operations. However, when Tian failed to repay the full investment, citing market liquidity issues, Pan decided to take legal action. Despite receiving a partial repayment of 10.6 million yuan, the remaining 5.15M yuan was never returned as the MFA blockchain account became inactive.
The case progressed through the Yancheng Central Court to the Jiangsu High Court, which ultimately deemed the contract invalid. The court ruled that digital currency investments contravened Chinese laws, violating public order and morals. As cryptocurrencies are not recognized as legal tender in mainland China, transactions involving them are considered illegal financial activities. Therefore, the parties were deemed to have entered the contract at their own risk, bearing the consequences of any losses.
This ruling serves as a cautionary tale for foreign investors engaging in cryptocurrency ventures with Chinese counterparts. It highlights the importance of understanding and adhering to local regulations when entering into agreements. Foreign investors should exercise caution and seek legal advice before committing to contracts with Chinese entities to avoid potential legal repercussions.
In conclusion, the Pan and Tian case underscores the complexities and risks involved in cross-border cryptocurrency investments. It emphasizes the need for thorough due diligence and compliance with local laws to prevent legal disputes and financial losses. As the cryptocurrency landscape continues to evolve, staying informed and navigating regulatory frameworks is essential for successful and secure investment ventures.