Introduction
On January 10th, the National Court Financial Trial Work Conference was held in video form. After the meeting, the internal court formed a draft of the “Minutes of the National Court Financial Trial Work Conference (for solicitation of opinions)”, but it has not been made public. However, a few days ago, some regulations on virtual currency suddenly spread online. However, because it is in the stage of soliciting opinions, not many people are paying attention. In fact, this “minutes” is of vital importance to participants in the crypto circle, and its importance far exceeds the “Announcement on Preventing Risks of Token Issuance and Financing” (referred to as “94 Announcement”) and “Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation” (referred to as “924 Notice”). This “minutes” is not a legal provision or a judicial interpretation, but it will directly affect the judgment rules of virtual currency cases. For the arrival of this “minutes”, Lawyer Guo has been looking forward to it for a long time. And Lawyer Guo has commented on many of the contents related to the six regulations on virtual currencies in this “minutes”. Those who are interested can read Lawyer Guo’s previous articles. As for the cases behind the six regulations, Lawyer Guo has handled many cases. Next, Lawyer Guo will interpret them one by one. The interpretation article will be divided into six parts, because each regulation represents the progress of the judiciary’s understanding of virtual currency. At the same time, because this “minutes” is currently in the stage of soliciting opinions, Lawyer Guo also put forward some opinions or suggestions on this matter.
Article 83 of the “Minutes” original text
[Handling of economic disputes involving economic crimes] In the trial of civil and commercial cases, if the court finds that the perpetrator is suspected of illegally raising funds, illegally issuing securities, illegally selling token tickets and other public-economic crimes in the name of issuing tokens for financing or engaging in virtual currency financial management and other asset management activities, etc., it shall promptly transfer the criminal clues to the investigating organs. Before the investigating organs make a decision to file a case, the people’s court shall suspend the trial; after the investigating organs make a decision to file a case, the people’s court shall rule to dismiss the case; if the investigating organs fail to file a case in a timely manner, the people’s court may report the case to the party committee and the political and legal committee for coordination. Civil disputes unrelated to the above-mentioned public-economic crimes arising from non-operational “virtual currency” transactions or offsetting actions based on basic legal relationships shall be accepted by the people’s court.
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Interpretation
The core of this article is to explain the handling of disputes over virtual currency as a payment consideration. Let’s take a closer look at it sentence by sentence.
First sentence: Virtual currency has some attributes of network virtual property
First of all, this sentence directly gives a judicial characterization to virtual currency. Speaking of the background, there are different conclusions on the characterization of virtual currency in various countries. Some believe that virtual currency is virtual property, some believe that virtual currency belongs to securities, and some directly define virtual currency as currency. In 2013, China defined virtual currency as a virtual commodity in the “Notice on Preventing Bitcoin Risks” jointly issued by the central bank and other five ministries. This definition was also continued in the “94 Notice” in 2017. After the “Civil Code” came into effect on January 1, 2021, since virtual commodities were classified into network virtual property, lawyer Guo proposed that virtual currency belongs to network virtual property. However, this definition was quietly deleted in the “924 Notice” in 2021. Now the “Meeting Minutes” have added this content back. The reason for this is that Guo believes it is more for the trial of judicial practical cases, after all, social contradictions cannot disappear just by treating them as air. Once there is this judicial definition, whether it is in the civil field or the criminal field, there can be a more accurate application.
Secondly, this sentence also affirms that virtual currency has value. Because if it belongs to property, it must have its own value. But Guo believes that the expression of this article still has some inappropriate aspects.
Modification suggestion: Partial virtual currency has some attributes of network virtual property . (Move the word “partial” from the end to the beginning)
Reason: 1. Why add “partial” at the beginning. There are various types of virtual currencies. Except for mainstream currencies such as Bitcoin, most virtual currencies can actually be classified as air currencies. Among these air currencies, the vast majority are not actually currencies that have direct or indirect value to the progress of blockchain technology or social ecology construction. They are even tools used by criminals to carry out pyramid schemes and illegal fundraising. These air currencies, regardless of their publishing purpose, circulation purpose, participant mentality, or final results, should not be classified as property. Therefore, only some virtual currencies (recognized by the international community or mainstream national governments) are virtual properties with attributes of network virtual property. If not limited, directly listing all virtual currencies as network virtual property will ultimately lead to new theoretical contradictions in judicial trial practice, making the judgment unable to be self-justified, and directly increasing the uncertainty of the judgment from the theoretical level. 2. Why delete “partial” at the end. First of all, network virtual property of course has multiple sub-attributes, but after Guo’s analysis, virtual currency is completely in line with all sub-attributes on the surface. Secondly, network virtual property itself is a complete judicial definition. If it is further subdivided, most legal judges may not fully understand which sub-attributes are. Not to mention other legal personnel and ordinary people. If you must add this “partial” at the end, then please legislators explain which part it is. Guo believes that we can say that virtual currency not only has the attributes of network virtual property, but also needs other attributes such as securities. In this way, both from the theoretical level and the practical level are reasonable.
Second sentence: If the parties agree to offset the debt arising from the basic relationship of mutual exchange, labor, and other matters with a small amount of virtual currency, and there is no other invalid reason, the people’s court should determine that the contract is valid.
Regarding the second sentence, it fully affirms the legality of virtual currency as the subject matter of the contract. After the “924 Notice” in 2021, many courts actually arbitrarily determined that the contract was invalid when encountering virtual currency-related cases. This is obviously unreasonable. Although this provision seems to only explicitly mention debts arising from mutual exchange and labor, we should not overlook the “etc.” at the end. This “etc.” reflects in judicial practice that it is likely to cause polarization. Some courts may think that “etc.” is almost equivalent to endorsing almost all civil legal relations that do not violate other legal provisions. Another part of the court may automatically ignore this “etc.” In addition, the expression “small amount” is also a similarly vague description. How much is considered a lot, and how much is considered a little? However, regarding this point, Lawyer Guo does not oppose it, but rather agrees with it very much. After all, every place has its special circumstances, and it is enough for each region to form a relatively unified standard of trial. Lawyer Guo believes that this also reflects the foresight of the legislator, finding the most suitable judgment standard through continuous experimentation.
Third sentence: If a party requests the other party to fulfill the obligation of delivering virtual currency, the people’s court may support it; if it cannot be actually performed due to restrictions on relevant policies and other reasons, the actual value of the property accepted by the party paying virtual currency according to the contract when it was signed can be used to determine the scope of compensation for losses.
Regarding the third sentence, it is the specific judgment rule of the court for cases where a small amount of virtual currency is used as the payment price. That is to say, in the future, the court should not directly determine that the contract is invalid for such cases, but may support it (another vague concept “may”). At the same time, even if the other party cannot pay the virtual currency, the compensation amount can be determined according to the actual value of the contract price agreed upon when the contract was signed. For example, if Zhang San buys Li Si’s cow with one bitcoin, but Zhang San refuses to pay Li Si one bitcoin after receiving the cow. At this time, the court can order Zhang San to pay Li Si, and if Zhang San clearly indicates that he must abide by the law and cannot use illegal means, cannot access Binance, or cannot pay bitcoin, the court can also order Zhang San to compensate Li Si for the actual value of the cow.
Furthermore, it is worth noting that in all previous official documents in China, even if virtual currency is recognized as a virtual commodity with property value, there is no evaluation basis for its value. Some courts refer to the price of the exchange, while others do not directly recognize specific prices, resulting in disputes between the parties being unable to obtain a fair and just ruling.
Proposed revision: It would be better if “can” were changed to “should” to increase judicial certainty.
Fourth sentence: If a party uses virtual currency as a regular payment tool to exchange legal currency or physical goods under the guise of a basic transaction contract, the people’s court should declare the contract invalid.
Regarding the fourth sentence, it is actually an extension of the “924 Notice” and is also to prevent some people from treating the court as an “exchange” and using false litigation to conduct virtual currency transactions. This is understandable, but Lawyer Guo believes that there are still some loopholes, because what is regular has not been explained. This point reflects in judicial practice, which may lead to some illegal elements using the loopholes in the judgment scale of some courts or the improper relationship with some judges to achieve regular virtual currency trading.
Proposed revision: It is recommended to provide an explanation for “regular”, such as referring to the identification standards for professional lenders: If a person conducts more than ten transactions using virtual currency as a payment tool within two years, they can be identified as having regularity.
Article 84 of the “Meeting Minutes” original text
[Trial of entrusted investment disputes of virtual currency] If both parties to the contract agree in the contract that the principal entrusts the trustee to register and register an account on the virtual currency trading platform in its own name and entrusts the trustee to engage in investment activities; or the principal directly entrusts the funds to the trustee, and the trustee engages in investment management in its own name or actually borrows the name of others, the entrustment investment contract between the two parties can be recognized. If the contract is signed after the “Announcement on Preventing Risks of Token Issuance and Financing” (September 4, 2017) is issued, the people’s court should declare the entrustment contract invalid due to the illegality of agency matters. The reasons for the occurrence of commissioned matters can be used as the main consideration factors for determining the degree of fault and shared by the parties for the losses suffered by the principal.
Interpretation
The core of this article is actually to indirectly determine the legal status of the “Notice 94”.
Before this, whether it was the “Notice on the Prevention of Bitcoin Risks” or the “Notice 94” or the “924 Notice”, the legal status was only a normative document, not a law. Although the “Meeting Minutes” is not a law, its status in judicial practice is equivalent to judicial interpretation, and the reference of the “Meeting Minutes” to the “Notice 94” is equivalent to giving the “Notice 94” the same legal effect in judicial trial as the law. Moreover, Lawyer Guo believes that although the “924 Notice” is not directly quoted, it is highly likely to be used by analogy in the actual judicial process.
After giving the “Notice 94” a “legal status”, judges in judicial practice can reduce the process of “free testimony” and do not have to worry about whether normative documents can be used as the basis for judgment. The original plaintiff and defendant can also avoid debate on whether the reference to the “Notice 94” is appropriate, greatly saving judicial resources and increasing the certainty of judgments.
In addition, this article also regulates the judgment criteria for the court to hear “virtual currency disputes of entrusted investment”, that is, contracts before September 4, 2017 are valid, and those after that are invalid, which is simple and clear. At the same time, this article also regulates the cause of action for such cases, that is, “disputes over entrusted investment contracts”. Before the “Meeting Minutes” was published, such cases had disputes over entrusted contracts, disputes over custody contracts, and even simple disputes over contracts. Finally, this article clarifies the handling method of such disputes, that is, “take the cause of the entrusted matter as the main factor for determining the degree of fault” to divide the responsibilities of the parties. For example, if Zhang San actively deceives Li Si to entrust him to invest in virtual currency, or Zhang San guarantees principal and interest to Li Si, or Zhang San uses Li Si’s trading account for quantitative trading, then Zhang San is likely to bear the main or even all compensation responsibility.
Overall, once this article is officially implemented, it will greatly protect the legitimate rights and interests of the entrusting party. For the previous brainless judgment method of “rejecting the plaintiff’s invalid contract”, it is undoubtedly a progress of justice.
Modification suggestion: Overall, this article is easy to understand and highly executable. However, this article does not mention how the price of virtual currencies entrusted for investment is determined. Although Article 83 of the “Minutes of the Meeting” mentions the handling of disputes involving payment disputes with virtual currencies, if the trading account containing virtual currencies is simply handed over to a third-party investment without being used as a means of payment (that is, there is no consideration), it is obviously impossible to evaluate the price of virtual currencies based on Article 83. Therefore, how to determine the price of virtual currencies in such cases may once again return to the ultimate problem of virtual currency disputes in recent years, “whether trading prices can be used as a reference”. However, from a comprehensive perspective of Articles 83-88, it may be intentional to avoid this issue. Of course, at this time, some keyboard warriors may jump out and say, “The defendant can be ordered to compensate for the virtual currency.” Then, Lawyer Guo asks, virtual currency value fluctuates greatly. What if it was 70,000 US dollars per coin when invested, but the price dropped to only 10,000 US dollars per coin in the end, but the quantity of coins did not change? In this case, how should the court judge? Should it rule to compensate for 7 coins? Or consider that there is no loss? Therefore, on this point, Lawyer Guo always insists that avoidance is not the fundamental way to solve the problem.
Article 85 of the “Minutes of the Meeting” Original Text
【Disputes related to “mining”】Mining of virtual currency refers to the process of generating virtual currency by calculating with dedicated “mining machines”. From the perspective of case handling, disputes caused by “mining” can be summarized into two types: one is that the parties have disputes over the payment of the price of the mining machine for buying or renting a mining machine to obtain virtual currency through mining activities; the other is a cooperative model that combines multiple legal relationships such as buying and selling of mining machines, profit sharing, or custody services. For example, the two parties jointly invest in purchasing mining machines and agree to share the profits after obtaining virtual currency. Later, disputes arise due to the seller’s failure to deliver goods or share profits. Due to the large energy consumption and carbon emissions of “mining” activities, low contribution to the national economy, and limited role in promoting industry development and technological progress, “mining” activities have gradually been strictly controlled and orderly cleared. When people’s courts hear cases, they should reasonably balance the rights and obligations of the parties according to the impact of public policies on contract performance at different times. Before the “Notice on Rectifying the Mining of Virtual Currency” (September 3, 2021) was issued, national policies did not explicitly prohibit mining activities. Therefore, for contracts that the parties agreed to buy, rent, or keep “mining machines” or provide related operation management, technology development and other services for the purpose of obtaining virtual currency through mining activities, and if the contract object or purpose is not illegal, the court shall support such contracts. If the contract cannot be performed after the policy is issued, one party proposes to terminate the contract, the court shall support it. After the contract is terminated, if it has not been performed yet, it shall be terminated; if it has been performed, the parties may request to restore the original state or take other remedial measures according to the performance situation and the nature of the contract, and have the right to claim compensation for losses. For contracts that the parties agreed to buy, rent, or keep “mining machines” or provide related operation management, technology development and other services after September 3, 2021, the people’s court shall deem such contracts invalid. In the case where one party files a lawsuit requesting to confirm the validity of the contract and continue to perform the contract, and the other party claims that the contract is invalid, or one party files a lawsuit requesting to confirm the invalidity of the contract and return the property, and the other party claims that the contract is valid, the people’s court shall explain to the plaintiff the change or increase of the litigation claim or explain to the defendant the counterclaim for simultaneous performance, and try to resolve the dispute as much as possible in one go. If the parties file a change in the litigation claims or raise a counterclaim as explained, the people’s court shall summarize the case dispute focus, organize the parties to provide sufficient evidence and cross-examination.
Interpretation
The core of this article is to determine the judicial rules for virtual currency “mining” cases. This is the longest of the six articles on virtual currency in the “Meeting Minutes”. However, although it looks long, there are also many problems. Lawyer Guo will guide you through the segmentation interpretation.
First sentence: Virtual currency “mining” refers to the process of producing virtual currency through dedicated “mining machines”. From the case trial situation, disputes caused by “mining” can be summarized into two types. One is that the parties purchase or lease mining machines for producing virtual currency through mining activities, and disputes arise due to the payment of mining machine price. The other is a cooperative model that integrates multiple legal relationships such as mining machine sales, cooperative sharing, or custody services. For example, the parties jointly invest in the purchase of mining machines and agree to share after obtaining virtual currency. Later, disputes arise because the seller does not deliver or share. Due to the large energy consumption and carbon emissions of “mining” activities, its contribution to the national economy is low, and its driving role in industrial development, technological progress, etc. is limited. It has gradually been strictly controlled and orderly cleared out.
First of all, in this paragraph, it can be seen that current legal experts have a great limitation in their understanding of the mining mechanism of virtual currencies. Traditionally, virtual currency mining does indeed use “mining machines” to calculate and produce virtual currencies. However, with the changes of the times and the development of technology, the POW (Proof of Work) mechanism of mining, such as Bitcoin, has become less and less mainstream. Even Ethereum has completed the transition from the POW to the POS (Proof of Stake) mechanism in 2022. In recent years, new and rising currencies, such as FIL, use the POC (Proof of Capacity) mechanism. In addition, there are also DOPS (Delegate Proof of Stake), DeFi Staking Mining (Liquidity Mining), etc. However, obviously, this article only applies to POW mining.
Modification suggestion: The virtual currency “mining” referred to in this article refers to the process of producing virtual currency through dedicated “mining machines”. (Only the definition part of mining involved in the first sentence is modified, and the others remain unchanged. At the same time, it is recommended to supplement other types of mining mechanisms.)
Second sentence: When a court hears a case, it should reasonably balance the rights and obligations between the parties based on the impact of public policies on contract performance at different times. Before the publication of the “Notice on the Cleanup of Virtual Currency ‘Mining’ Activities” (September 3, 2021), national policies did not explicitly prohibit mining activities. Therefore, if a party requests confirmation of invalidity of a contract for buying and selling, leasing, storing “mining machines” or providing related operation management, technical development and other services based on the illegality of the contract subject matter or purpose in the lawsuit, the people’s court will not support it. If a party proposes to terminate the contract due to the policy change leading to subsequent performance impossibility, the people’s court should support it. After the contract is terminated, if it has not been performed yet, the performance shall be terminated; if it has been performed, the parties may request to restore the original state or take other remedial measures according to the performance situation and the nature of the contract, and have the right to claim compensation for losses.
First of all, the core content of this paragraph is actually the same as Article 84, which also gives the “Notice on the Cleanup of Virtual Currency ‘Mining’ Activities” (hereinafter referred to as the “Notice”) the equivalent legal status. Secondly, this article also stipulates the effectiveness of contracts before the publication of the “Notice”, that is to say, mining contracts before September 3, 2021 are valid. This point fully illustrates how wrong the judgment of the first mining case in Beijing that year was. Regarding the article commented by Lawyer Guo on the case, you can search for “Comment on the First Beijing Mining Contract Case”, which has been removed from some platforms. I don’t know if it touched on someone’s pain, but most of Lawyer Guo’s views in the article are actually reflected in this “meeting minutes”, so the judiciary will not be absent, thumbs up. Finally, this paragraph also stipulates the subsequent performance of the original mining contract after the “Notice” was issued. Simply put, mining cannot continue, and if there are losses caused by this, the responsibility can be determined based on the performance situation and the nature of the contract.
Modification suggestion: It is recommended to change the publication date of the “Notice” from September 3, 2021 to September 24, 2021, or simply delete this date. Because although the time on the “Notice” is September 3, in fact, it was publicly released on September 24. Laws are also effective from the date of public release at the earliest, and it is inappropriate to calculate based on the time when the document was formed.
Clause 3: For contracts related to the sale, lease, custody of “mining machines” or the provision of related operation management, technical development and other services agreed upon by the parties after September 3, 2021, the People’s Court shall deem the contract invalid. In the case of one party filing a lawsuit to request the confirmation of the validity of the contract and request its continued performance, while the other party argues that the contract is invalid, or one party files a lawsuit to request the confirmation of the invalidity of the contract and the return of property, while the other party argues that the contract is valid, the People’s Court shall explain the change or addition of the litigation request to the plaintiff or explain the counterclaim of simultaneous performance to the defendant, and try to resolve the dispute as much as possible in one go by organizing the parties to provide sufficient evidence and cross-examination.
This paragraph continues from the previous paragraph and mainly stipulates that contracts related to “mining machines” after the release of the notice are invalid. On this point, if anyone among the plaintiff and defendant insists that the contract is valid, they will most likely lose the case.
Proposed revision: In addition to the time issue like the previous paragraph, Lawyer Guo suggests adding a sentence at the end of this clause: “According to the fault responsibility of the parties, the judgment shall be made in accordance with Article 153 of the Civil Code.” Although this clause clearly stipulates that contracts after the release of the notice are invalid, how to deal with the contracts after they are invalid is not specified. Moreover, based on previous cases, many courts have adopted the simple and rude judgment of rejecting the litigation request. Lawyer Guo believes it is better to write it down.
Article 86 of the minutes:
【Disputes between users and virtual currency trading platforms】If a user registers for virtual currency trading on a virtual currency trading platform before the release of the Announcement on Preventing the Risks of Token Issuance and Financing (September 4, 2017), and the trading platform fails to perform the service agreement, resulting in the user’s loss, the trading platform shall bear the breach of contract liability according to law. If the user is also at fault for the loss, the compensation amount for the corresponding loss can be reduced. If a user registers for virtual currency trading on a virtual currency trading platform after the announcement on preventing the risks of token issuance and financing (September 4, 2017), and files a civil lawsuit with the People’s Court claiming damages due to the trading platform or the virtual currency issuer’s failure to fulfill the obligation to clear out, the People’s Court shall reject the application and inform the applicant to apply to the relevant department for processing.
Interpretation
Regarding this statement from Lawyer Guo, I won’t go into a detailed interpretation. Because 90% of the purpose of this statement is to provide a basis for the court to reject such cases during the trial, it is of little use to ordinary investors and is extremely disappointing.
First sentence: Virtual currency has some attributes of network virtual property
Firstly, the “94 Announcement” was issued in 2017. Most of the disputes before 2017 between investors and exchanges have passed the statute of limitations for litigation. As for cases after 2017, the people’s court should rule that they will not be accepted and inform them to apply to the relevant departments. As for which department is involved, it is most likely the public security authorities or the business department. But why didn’t the “Meeting Minutes” directly specify these departments? From a social perspective, if the court wants to increase other people’s work, they will have to ask if they agree or not. Therefore, unless the Supreme Court, the Supreme Procuratorate, and the Ministry of Public Security jointly issue judicial interpretations, the court can only deal with its own cases.
Modification suggestion: Oh, I hope that the Supreme Court, the Supreme Procuratorate, and the Ministry of Public Security will jointly issue some judicial interpretations on virtual currency cases as soon as possible. Lawyer Guo has dealt with so many virtual currency cases, and the most difficult ones are not civil cases, but those cross-border criminal and civil cases that fall under “three noes”.
Article 87 of the “Meeting Minutes”
【Judgment and Execution Issues】In response to the plaintiff’s request for the delivery or return of “virtual currency” such as Bitcoin, the people’s court shall investigate the holding status of the virtual currency, clarify whether there is a possibility of delivery or return, and state it in the document. If it is determined after trial that it cannot be returned or delivered, the people’s court shall guide the parties to make reasonable claims and encourage the parties to reach an agreement on property rights. If it is confirmed after trial that there is a basis for actual performance, the people’s court shall clearly state in the judgment that the virtual currency should be delivered or returned according to the plaintiff’s request. If the party who is obligated to deliver or return refuses to perform the effective judgment, the people’s court may take corresponding measures in accordance with the relevant provisions of the Civil Procedure Law.
Interpretation
This clause can be said to be one of the most important clauses in the six clauses of the “Meeting Minutes” on virtual currency, second only to clause 83 (which recognizes the value of virtual currency).
It is difficult to handle virtual currency cases, not only because it is difficult for the court to support the plaintiff’s litigation request, but also because even if the plaintiff wins, it is difficult to enforce it. In the past few years, there have been many cases of courts supporting the return of virtual currency to the plaintiff, but except for some cases with special circumstances (such as breach of contract clauses agreed upon by both parties), there is not a single ordinary case (not publicly available) that can be fully executed.
Although the release of this policy does not quickly solve the problem of the difficulty of enforcing virtual currency cases, it at least opens up the situation for the execution of virtual currency cases, paving the way for the execution of virtual currency cases.
The first sentence: For a litigation request from a party requiring the delivery or return of virtual currency such as Bitcoin, the people’s court shall ascertain the holding status of the virtual currency, clarify whether there is a possibility of delivery or return, and state it in the legal document. If it is determined through trial that it cannot be returned or delivered, the parties shall be guided to make reasonable claims and encouraged to reach agreement on property rights.
First of all, there are too many ways to achieve “not possible” in the point of “whether there is a possibility of delivery or return”. For example, if the virtual currency in a decentralized wallet forgets the private key and mnemonic phrase, or if the wallet is “stolen” by a hacker and enters a mixer. These are the simplest ways (just examples, not teaching people how to avoid enforcement, more complex ones are not given before being fully disclosed, don’t let the bad guys learn). In this case, the court is difficult to confirm whether there is a possibility of delivery or return. Moreover, according to the current legal logic and past cases, the court will not force the executed person to buy back the virtual currency for execution (those interested in this can leave a message to write another analysis article). In this way, if there is no possibility of delivery or return, the court can only “guide the parties to make reasonable claims”. As for what is a reasonable claim, you can refer to the provisions of Article 83 of the “Meeting Minutes”, but whether “reasonable claims” include requiring the defendant to return an equivalent amount of legal currency is not directly stated. Lawyer Guo speculates that this is probably to prevent the court from becoming an “exchange”. (It is also understandable that only when the country officially opens the operation of the exchange can these fundamental contradictions be resolved, but when will this day come?)
According to the second sentence, if it is found through trial that there is a basis for actual performance, the people’s court shall, in accordance with the party’s request, specify in the judgment the delivery or return of virtual currency. If the party who is obliged to deliver or return refuses to perform the legal obligation determined by the effective judgment, the people’s court may take corresponding measures in accordance with the relevant provisions of the Civil Procedure Law. Although this sentence is not very clear (can the court execute the illegal exchanges that are considered illegal in China? Is it legitimate?), it indeed directly grants executability to virtual currencies. The procedures for civil enforcement are nothing more than sealing, seizure, freezing, etc. If it is in exchanges like Binance and Huobi, it is still possible to realize it. Guo believes that the major exchanges are also willing to cooperate with the court to execute (the credibility of the exchange is the key to success or failure). However, it may not be possible for small exchanges, as many second- and third-tier exchanges cannot even come up with a cash flow of 10 million U.S. dollars (keyboard warriors can treat me as blowing my own trumpet).
In summary, this article cannot fundamentally solve the problem of enforcing virtual currency-related cases. However, it is indeed a great judicial progress compared to the past. Regarding this article, Guo does not have any modification suggestions. Because society is not black and white, legislation is not spoken out, and the current relatively vague regulations can provide more sufficient practical basis for more feasible laws in the future.
Article 88 of the Minutes
【Handling of Economic Disputes Involving Economic Crimes】In the trial of civil and commercial cases, if the people’s court finds that the perpetrator is suspected of illegally raising funds, illegally issuing securities, or illegally selling token tickets in the name of issuing tokens for financing or engaging in virtual currency management and other asset management activities involving public economic crimes, it shall promptly transfer the criminal clues to the investigating organs. Before the investigating organs make a decision to file a case, the people’s court shall suspend the trial; after the investigating organs make a decision to file a case, the people’s court shall make a ruling to dismiss the case; if the investigating organs fail to file a case in a timely manner, the people’s court may report the case to the Party Committee and the Political and Legal Affairs Committee for coordination. In civil disputes that are not related to the above-mentioned crimes and arise from non-operational “virtual currency” transactions or offsetting actions based on basic legal relationships between parties, the people’s court shall accept them.
Interpretation
This article is a procedural rule.
In past cases, although there have been provisions such as Article 11 of “Several Provisions on Some Issues Concerning Economic Crimes Involved in the Trial of Economic Dispute Cases”: “If the people’s court in the case of economic disputes heard that it is not an economic dispute case but has a suspicion of economic crime, it shall make a ruling to reject the suit and transfer relevant materials to the public security organs or procuratorial organs.” However, due to the fact that this provision is too old-fashioned, the wording of “economic disputes” and other terms in it is obviously not in line with the current judicial situation, and its effectiveness level is low, lacking authority. Therefore, in the process of actual disposal, many courts will only make a ruling to reject the suit, but after making a ruling to reject the suit, they will not immediately transfer the case files to the public security organs for investigation and filing, which puts the plaintiff in a state of “being left to themselves” (the public security organs generally find it difficult to file a case).
However, this new rule clearly stipulates that “economic crimes involving multiple parties” should be transferred to the public security organs for investigation of criminal clues, and even further stipulates that if the public security organs fail to file a case in a timely manner, the court can also report the case to the Political and Legal Affairs Commission for coordination and handling. This will make such cases no longer in a state of “being left to themselves”.
Finally, this provision also puts the time node for the court’s ruling to reject the suit on the public security organ’s “decision to file a case”, rather than the current common practice of before the public security organ’s “decision to file a case”. This will inevitably greatly enhance the protection of the legitimate rights and interests of the parties concerned.
Modification suggestion: If “economic crimes involving multiple parties” can be changed to all criminal crimes, it would be even more perfect, and ordinary cases such as fraud and theft would also be better dealt with. However, the probability of this modification suggestion being adopted is very small. After all, it will undoubtedly greatly increase the judicial cost of the courts and public security organs, and can only better protect ordinary parties with “limited economic losses”. After all, while the judiciary wants to protect the legitimate rights and interests of every citizen as much as possible, the fiscal budget is a practical problem to be solved. There will always be a process of “enriching the rich first and then driving the poor”.
Conclusion
After several days of work, the six provisions on virtual currency in the “National Court Financial Trial Work Conference Minutes (Draft for Soliciting Opinions)” have come to a temporary conclusion, and a ten-thousand-word analysis and interpretation has been formed, which also mentions some modification suggestions made by Lawyer Guo himself. In fact, there have been some efforts by Lawyer Guo behind these six provisions, but Lawyer Guo believes that these six provisions can still be made more reasonable. I don’t know if these suggestions will be adopted, or how many of them will be adopted. However, Lawyer Guo and his team have always regarded promoting the compliant development of the blockchain (especially virtual currency) industry as a lifelong goal. Well, the above is Lawyer Guo’s interpretation of the contents of Articles 83 to 88 of the “National Court Financial Trial Work Conference Minutes (Draft for Soliciting Opinions)”.
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