It is not secret that China’s government has a tough stance against cryptocurrencies. China surprised the crypto world in May 2021 when it banned Bitcoin mining activities. China also banned all crypto related transaction in September of the same year.
The government expressed concerns over economic stability and criminal activities. The crypto industry throughout the world was let down since it was the biggest mining hub. It forced miners to shut their operations and seek new homes abroad.
Now, a Chinese court has ruled against crypto lending activities. The court said that such activities fall outside the scope of the China’s legal system.
Why did the court ban Crypto lending?
Nanchang People’s Court clearly said that lending digital currencies is “not within the scope of civil litigation.” It will have heavy implications for the DeFi sector which thrives on crypto lending and borrowing.
The judge made a clear distinction between China’s central bank digital currency (CBDC) and cryptocurrencies. As per the court, cryptocurrencies like Bitcoin, Ethereum, and Tether only exist in the virtual form, hence, they lack legal tender status.
The courthouse set a precedent and made it very clear that such form of currencies cannot be used in the market.
What was the court case that led to the ruling?
An individual that goes by the name “Mr. Ming” lent 80,000 USDT to “Mr. Gang” because Gang wanted to trade stablecoin. He expected to earn higher yields to payback the loan.
When he failed to payback the loan, Ming filed a lawsuit in the Nanchang People’s Court. However, USDT was not under the purview of court, as mentioned before.
Crypto-related court rulings in China
In a 2015 case that ended in 2022, a Chinese court contrastingly ruled in favor of crypto ownership. The ruling came despite the Central Bank’s restrictions on cryptocurrencies. This case also involves a crypto loan, where Litecoin (LTC) exchanged hands.
It demonstrates how China and its courts are building up their strict stance against the digital asset industry. In another December 2022 ruling a court in Hangzhou declared that NFTs are protected under the Chinese law. That ruling offered a sigh of relief for Chinese NFT enthusiasts.