On 7 July 2022, the Beijing Third Intermediate Court determined a Bitcoin mining contract null and void on the ground of public interest, given that virtual currency transactions threaten people’s asset security and the country’s financial order and that bitcoin mining at great expense of electricity resources and carbon emissions is incompatible with China’s paths to high-quality economic and social development, goals of carbon peaking and carbon neutrality.
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It is the first case in Beijing where a bitcoin mining contract has been ruled invalid.
In May 2019, the plaintiff Fengfu Jiuxin Company (北京丰复久信营销科技公司, hereinafter “the plaintiff”) signed a series of service contracts with the defendant, a blockchain business named Zhongyan Zhichuang Company (中研智创区块链技术有限公司, hereinafter “the defendant”). Under the contracts, the defendant was required to purchase and operate micro storage servers (i.e., “mining machines”), provide data value-added services through bitcoin mining, and pay the proceeds, and the plaintiff would bear the defendant’s management costs in return.
During the performance of the contract, the plaintiff repeatedly requested the defendant to pay the proceeds, but to no avail, and thus sued the defendant for 278.16 bitcoins and the losses arising from the defendant’s occupation of the “mining machines” after the service had expired.
In the first trial, the Chaoyang Primary People’s Court of Beijing held that the transaction involved in this case was, in essence, a bitcoin mining activity aimed to produce virtual currency via exclusive “mining machines.” In the court’s opinion, bitcoin mining wastes a great deal of energy and harms the public interest. Moreover, relevant authorities have explicitly prohibited Bitcoin-related transactions.
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Therefore, the Chaoyang Primary People’s Court ruled the contract invalid and dismissed the plaintiff’s claim.
After the first trial, the plaintiff appealed. The Beijing Third Intermediate Court upheld the trial court judgment and dismissed the appeal.
This case exemplifies, once again, the illegality of virtual currency transactions in China.
Cover Photo by NII on Unsplash