The Shanghai Fengxian People’s Court, a district court in China, has passed a ruling invalidating a car sales contract that the buyer paid with a digital currency. The ruling was also upheld by the Shanghai No.1 Intermediate Court, where the plaintiff filed an appeal.
According to details of the case shared by the Fengxian Court on its WeChat page, the case was first filed by the plaintiff—the buyer of the car—back in 2019. The man, identified only as Mr. Huang, accused the undisclosed car sales company of breach of contract.
The plaintiff claims that he signed a contract with the car dealer to buy a 2019 Audi A6 valued at around 409,800 yuan (around $58,400 at present) for 1,281 UniHash tokens (UNIH, also called Yurimi in China).
While the agreed payment was made immediately, the dealer failed to deliver the car in the three months the contract terms stipulated, so the buyer took the legal steps.
The court’s ruling cited a regulation made in 2017 that stated that digital currencies “cannot and should not be used as a currency for circulation in the markets.” The court judged that using the digital token instead of fiat money made the sales contract null and void.
“The exchange and sale of virtual currency, the provision of matching services for virtual currency, the issuance of tokens, and the trading of derivatives of virtual currency are all illegal financial activities,” the court said.
Per the ruling, the plaintiff is to receive neither damages, delivery of the car, nor a refund of the tokens. Reports also indicate that the UNIH token had a controversial status and suspicious origins. At present, the token project has not delivered on any promises made in its white paper.
China’s digital currency regulations are still murky
Despite the ruling taking three years to materialize, the law it is based on is what has evolved to be China’s blanket ban on digital assets made in 2021.
The ruling also shows the lack of clarity on the legal status of digital assets in China. In another well-publicized ruling, a court declared digital assets like Bitcoin to be property protected by Chinese property law.
The case involved a loan contract signed by two parties in which the borrower failed to repay one Bitcoin loan. In the case, the court declared that Bitcoin “has a certain economic value and conforms to the property’s attributes, the legal rules of property rights are applied for protection.”