As an entry ticket to the encrypted digital asset market, USDT has always been controversial. On the one hand, in the encrypted digital asset market with huge price fluctuations, USDT has become an important medium for users to conduct encrypted digital asset transactions due to its stable price; Unclear." In judicial practice, how does the court view USDT? Recently, the chain law team discovered a case when updating the chain law think tank. The plaintiff transferred USDT to the defendant's account, and the defendant issued an IOU. However, the court denied the existence of a private loan relationship between the two parties in the judgment and rejected the plaintiff's appeal.
case file
Trial Court: Luohe Intermediate People's Court of Henan ProvinceCase number: (2020) Henan 11 Minzhong No. 2674Cause of action: Private lending disputeTrial Procedure: Second InstanceJudgment date: December 23, 2020
o1 Case brief
On the afternoon of August 25, 2020, Zhu's husband transferred the virtual currency USDT coins in his wallet to Ren's virtual wallet IMTOKEN 79596 USDT coins through his online virtual wallet IMTOKEN.On September 4, 2020, Ren issued an IOU to Zhu, which stated: Today, Zhu received RMB 400,000 in cash and will pay it off in a week. The overdue fine for one day is calculated at an interest rate of 5‰. Later, because Ren failed to repay the loan on time, Zhu sued the court to demand that Ren repay the loan principal of 490,000 yuan and late fees.
o2 Court opinion
The court of first instance held that: According to Article 8 of the "General Principles of the Civil Law of the People's Republic of China", civil subjects shall not violate the law or violate public order and good customs when engaging in civil activities.The USDT involved in this case is a network "virtual currency", which does not have the same legal status as currency, and cannot and should not be used as currency in the market. Citizens invest and trade illegal "virtual currency", although they are personal freedoms, they cannot be protected by law. The behaviors of Zhu and Ren through the online virtual wallet are not protected by law, and the consequences and losses caused by it shall be borne by both parties themselves. To sum up, the evidence provided by Zhu is not enough to prove that there is a real loan relationship between him and Ren, and his claim is not supported by this court.The court of second instance held that: Article 9 of the Provisions of the Supreme People's Court Concerning Several Issues Concerning the Application of Law in the Trial of Private Lending Cases stipulates: "A loan contract between natural persons may be deemed to be established if it falls under any of the following circumstances: For payment, when the borrower receives the loan; (2) For payment by bank transfer, online electronic remittance, etc., when the funds reach the borrower's account; (3) For delivery by bill, when the borrower obtains the right to the bill according to law (4) When the lender authorizes the right to control a specific capital account to the borrower, when the borrower obtains the actual right to control the account; (5) When the lender provides the loan in other ways agreed with the borrower and the actual performance is completed. "In this case, the appellant claimed that it had a private loan legal relationship with the appellee, but failed to provide evidence to prove that it handed over cash, bills, capital accounts, etc. to the appellee or made a legal and effective electronic transfer to the appellee;The appellant claimed that the method of lending funds to the appellee was to transfer USDT coins on a specific trading platform. The appellee recognized the fact that there was a transfer of USDT coins between the two parties, but denied that this fact was the method of providing loans agreed by the two parties. The appellant It is not possible to further prove that the transfer of USDT coins on a specific trading platform is a loan delivery method that can be agreed by both parties and complies with the law, so the loan contract between the two parties does not comply with the above-mentioned laws.According to the "Announcement of 7 Departments including the People's Bank of China on Preventing the Risks of Token Issuance and Financing", USDT currency, as a "virtual currency", does not have monetary attributes such as legal compensation and mandatory, and does not have the same legal status as currency. It should not be used as currency in the market, so the appellant’s grounds for appeal that the transfer of USDT coins on a specific trading platform is to fulfill the obligation of private lending capital contribution in this case cannot be established.
o3 Chain Law Review
Based on the facts ascertained by the court so far, there are two reasons why the court denied the existence of a private lending relationship between the plaintiff and the defendant:One is that the act of transferring USDT is not a way of providing loans as agreed by both parties. The second is that USDT cannot be used as a currency to become the subject matter of private lending disputes.The essence of the first point is that the court held that the private loan contract between the plaintiff and the defendant was not established. So what is a private loan contract?Private lending is the "cause of action" in civil litigation. According to the provisions of the "Supreme People's Court's Interpretation and Application of the Provisions on the Cause of Action of Civil Cases", the four levels of causes of action are contract, management without cause, unjust enrichment dispute-contract dispute-loan contract Disputes—private lending disputes, private lending disputes belong to the fourth level of cause of action.With reference to the above understanding and application, according to Article 196 of the "Contract Law" (now Article 667 of the "Contract Section" of the "Civil Code"), a loan contract refers to a contract in which the borrower borrows money from the lender and returns the loan and pays interest when it is due. .The so-called private lending disputes refer to the borrowing behavior between citizens and between citizens and non-financial institutions and enterprises. The currency of the loan can be foreign currency, Hong Kong dollar, Taiwan dollar, and treasury bills and other securities.Second, can USDT become the subject matter of private lending?According to the provisions of the current "Civil Code" and with reference to the provisions of "Contract Compilation Understanding and Application of the Civil Code of the People's Republic of China", the loan contract has the following four characteristics:First, the subject matter of the loan contract is currency, excluding other consumables or non-consumables.
Second, loan contracts are generally paid contracts. Loans issued by financial institutions, in accordance with the provisions of the People's Bank of China, generally should charge a certain amount of interest. For the borrower, after the loan contract expires, not only the principal should be returned, but also the interest should be paid according to the agreement. A loan contract between natural persons can also be paid, but the agreed interest rate must not violate the state's regulations on loan interest rates.Third, the loan contract is a bilateral contract. As a lender, the loan should be provided according to the date and amount agreed in the loan contract, otherwise a certain liquidated damages should be paid to the other party. The borrower shall use the loan according to the purpose stipulated in the contract, and shall return the principal and pay interest when it is due.Fourth, the loan contracts between financial institutions and natural persons, legal persons and unincorporated organizations are contractual contracts. If the parties express their intentions and reach a written agreement, the contract is established; the loan contracts between natural persons are practical contracts. established.In addition, according to the second paragraph of Article 668 of the "Civil Code", the content of a loan contract generally includes terms such as the type of loan, currency, purpose, amount, interest rate, term, and repayment method.
With reference to the provisions of the "Interpretation and Application of the Contract Compilation of the Civil Code of the People's Republic of China", the "currency" mainly refers to whether the loan is in Renminbi or a certain foreign currency.In other words, whether it is RMB or foreign currency, such as the US dollar, can become the subject matter of private lending.Obviously, according to the above-mentioned regulations, the so-called lending contract with encrypted assets such as "USDT" as the "loan object" is not legally in compliance with the law, and does not establish a legal relationship of a private lending contract, or does not establish a loan contract dispute relationship. Neither USDT nor Bitcoin nor Ethereum belong to the category of "currency" but are just virtual property, which is clearly stipulated in the previous notice on preventing Bitcoin risks and the 1994 Announcement.That is to say, when a loan contract is established, its "subject matter" is regulated by law, and a loan contract with something other than the statutory one as the subject matter of the loan does not establish a loan contract in the legal sense.Loan contracts in the traditional sense include loan contract relationships between financial institutions and natural persons, legal persons and unincorporated organizations, and loan contract relationships between natural persons.The "virtual currency lending business" in the currency circle mainly includes "loaning" between virtual currency lending service providers and individuals, and between individuals Instead, use "encrypted assets" or "digital assets", here for the convenience of readers to read and discuss, temporarily use "virtual currency".)
Strictly speaking, service providers who provide "virtual currency lending business" or other services in the currency circle are not financial institutions in the legal sense, so "borrowing" in the industry does not involve financial institutions. Although it is "loan" in name, it is not a loan in the legal sense of our country. If a lawsuit is brought to the court on the basis of a private lending dispute, there is a high probability that it will be rejected (lost).Taking the titled case as an example, although it filed a lawsuit claiming repayment on the basis of private lending disputes, since USDT is not a "currency" recognized by the lending relationship in the legal sense, the court still held that the private lending contract it claimed was invalid and rejected it. Claims.
o4 Some inspirations from this case
1. The "loan" in the currency circle with digital assets such as Bitcoin, Ethereum, and Tether as the subject matter is called a loan, but it is not a legally recognized "loan contract". Both parties must fully understand this. Appropriate adjustments need to be made to the "written loan contract" to comply with the current legal requirements.2. For "loans" in the currency circle with digital assets such as Bitcoin, Ethereum, and Tether as the subject matter, the "private lending dispute" should be carefully considered as the cause of action when suing.3. If the digital assets such as Bitcoin, Ethereum, TEDA are used as the subject matter of currency circle "borrowing", it is best to state the loan situation in written form, which must specify the currency, corresponding loan amount, transfer and receipt remittance address, interest, etc.4. Even if the court does not recognize the "private lending relationship", it can still file a lawsuit on the grounds of "unjust enrichment" and demand the return of the corresponding digital assets, as is the case described in this article.5. When it comes to large amounts of digital asset lending, you should be more cautious and remember to complete the corresponding legal procedures.
