Author: Shanghai High Court; Source: RWA Industrial Research Institute

The concept of virtual currency has emerged for the first time in this century A decade was proposed. Thanks to the enthusiasm of many "gold diggers", its value has been greatly increased several times. Some issuers and investors of virtual currencies have also made a lot of money.

However, is it legal to carry out businesses such as virtual currency issuance? Is it safe to participate in activities such as virtual currency investment?

Recently, the Songjiang District People’s Court of Shanghai (hereinafter referred to as the Songjiang District People’s Court) concluded a service contract dispute arising from the validity of a virtual currency issuance financing service contract. case.

Case Review

In 2017, virtual currencies such as Bitcoin and Ethereum experienced explosive price growth. The plaintiff, an agricultural development company (hereinafter referred to as Company X), was attracted and came up with the idea of ​​issuing its own virtual currency and raising funds through it.

Under the recommendation of an investment management company of the defendant (hereinafter referred to as Company S), Company X became more confident in the future development of token issuance financing. Therefore, the "Blockchain Incubation Agreement" was signed with Company S, and Company S was entrusted to produce a "white paper" and issue tokens on the blockchain based on the most mainstream blockchain smart contract technologies such as Bit and Ether.

After signing the agreement, Company S produced a "white paper" for Company X to help Company X achieve token issuance financing. Before and after the completion of the "white paper", Company X paid Company S two service fees totaling 300,000 yuan as agreed.

Company X believes that matters related to the issuance of tokens have been fully delegated to Company S. , looking forward to the day when the token is issued. However, to Company X's surprise, one year later, the token issuance has not yet been completed. Upon inquiry by Company . Company

People’s Court Judgment

The People’s Court held after trial that token issuance financing refers to the financing subject’s illegal sale and circulation of tokens to investors.Raising so-called "virtual currencies" such as Bitcoin and Ethereum by investors is essentially an act of illegal public financing without approval, and is suspected of illegal sales of tokens, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal crimes. Activity. Therefore, no organization or individual may illegally engage in token issuance and financing activities.

In this case, the business scope of Company The tokens entrusted to Company S to be issued belong to virtual currency, and issuing tokens is the main service content stipulated in the "Blockchain Incubation Agreement". Because the agreed services were illegal financial activities, violated relevant financial control regulations, and disrupted the economic and financial order, the "Blockchain Incubation Agreement" involved in the case was invalid.

The contract involved in the case is invalid due to violation of mandatory provisions of the law. After the contract is invalid or revoked, the property obtained as a result of the contract shall be returned. The party at fault shall compensate the other party for the resulting losses. If both parties are at fault, they shall each bear corresponding responsibilities. In this case, both Company X and Company S were at fault for invalidating the Blockchain Incubation Agreement. The People's Court comprehensively considered the faults and losses of both parties and ordered Company S to return Company X's service fee of RMB 250,000, and did not support Company X's remaining litigation claims.

After the verdict, neither the plaintiff nor the defendant appealed, and the verdict is now effective.

Judge’s statement

Sun Jie, second-level judge of the Commercial Tribunal of Songjiang District People’s Court

Many people, like the parties involved in this case, raise funds to carry out businesses such as virtual currency issuance in order to ride on the new "gold rush", or to obtain technical support and enter into projects with other companies Cooperate, but got into contract disputes because the project did not unfold as expected. However, virtual currency-related business activities are subject to greater legal risks. If you enter the market blindly without sufficient market research, you will be like Company X and get nothing.

The judge hereby reminds you that you should be highly vigilant about legal risks related to virtual currencies, be cautious in participating in virtual currency investment transactions, do not privately conduct virtual currency issuance business, and strictly abide by financial regulations. market laws and regulations to jointly maintain my country's financial security and stability.

1. There are legal risks involved in participating in virtual currency investment transactions

In my country, virtual currency does not have the same legal status as legal tender. As a virtual commodity, it hasHas property value. Although our country's laws do not clearly stipulate virtual currency, the regulations issued by the People's Bank of China and other departments regulate virtual currency-related business activities. Relevant regulations make it clear that virtual currency-related business activities are illegal financial activities, and any virtual currency-related business activities such as legal currency and virtual currency exchange, token issuance and financing are suspected of illegal sales of token tickets, unauthorized public issuance of securities and other illegal financial activities. Strictly prohibited and resolutely banned according to law.

There are legal risks involved in participating in virtual currency investment transactions. Any legal person, unincorporated organization or natural person who invests in virtual currency and related derivatives in violation of the mandatory provisions of laws and regulations will be subject to legal risks. The relevant civil legal actions are invalid and the resulting losses shall be borne by the parties themselves. Therefore, although it is not illegal for individuals to simply hold virtual currencies, commercial entities cannot participate in virtual currency investment transactions or even issue tokens on their own as they wish. Once the bottom line of civil and criminal legal principles and rules is touched in the transaction, it will be lightly Otherwise, you will bear the loss yourself, or in the worst case, you will be suspected of committing a crime.

2. Why virtual currency-related business activities are strictly regulated

Virtual currency is a virtual currency Commodities have property attributes and are not prohibited by law. So, why are virtual currency-related business activities subject to strict regulations, and are even clearly classified as illegal financial activities?

The prevalence of speculation activities in virtual currency transactions such as Bitcoin will not only disrupt the economic and financial order, but may also become a payment and settlement tool for illegal and criminal activities, breeding money laundering, illegal Fund-raising, fraud, pyramid schemes and other illegal and criminal activities. On the one hand, virtual currency will disrupt financial order and endanger financial security. For example, using virtual currency for financing is actually an unapproved illegal public fundraising act, which may be suspected of unauthorized public issuance of securities, illegal fund-raising, etc.; on the other hand, it is Allowing virtual currencies to enter the financial market, such as conducting exchanges between legal currencies and virtual currencies, or exchange transactions between virtual currencies, will harm social and public interests. The anonymity and decentralization of virtual currencies themselves make them extremely easy to be exploited by illegal exchanges. , becoming a medium for illegal or even criminal acts, seriously endangering the property safety of the people. Therefore, laws and regulations have always maintained a high-pressure crackdown on virtual currency trading and speculation activities.

3. The judge reminded: Contracts involving virtual currency may be invalid due to violation of mandatory provisions of laws and regulations

Disputes surrounding contracts related to virtual currency transactions should be brought to the People's Court At this time, the People's Court will take the initiative to review the validity of the contract in accordance with its authority. When conducting a review in accordance with the relevant provisions of the "Code of the People's Republic" on the validity of civil legal acts, the judge needs to confirm whether the relevant activities are seriously illegal, that is, when reviewing the contractWhether the content violates mandatory provisions of laws and regulations. For disputes related to contracts related to virtual currency transactions, it is necessary to review whether the contract violates the legal currency issuance system, financial market management laws and regulations and other invalid circumstances.

If the contract is invalid, the property obtained due to the contract shall be returned; it cannot be returned Or if it is not necessary to return it, it should be compensated at a discount. The party at fault shall compensate the other party for the resulting losses. If both parties are at fault, they shall each bear corresponding responsibilities. Therefore, for companies and individuals who blindly participate in virtual currency transactions, their rights may not be effectively protected.

Take this case as an example. The service contract between Company Under the circumstances, Company They must also bear corresponding responsibilities.

Legal Article 1, "Code of the People's Republic"

Article 153: Civil legal acts that violate the mandatory provisions of laws and administrative regulations are invalid. However, this mandatory provision does not invalidate the civil legal act except where such mandatory provision does not render it invalid.

Civil legal actions that violate public order and good customs are invalid.

2. "Announcement on Preventing Token Issuance and Financing Risks"

1. Accurately understand the essential attributes of token issuance and financing activities

Token issuance financing refers to financing entities raising so-called "virtual currencies" such as Bitcoin and Ethereum from investors through the illegal sale and circulation of tokens. It is essentially an act of illegal public financing without approval. , suspected of illegal sales of tokens, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities. Relevant departments will closely monitor relevant developments, strengthen work coordination with judicial departments and local governments, strictly enforce the law in accordance with the current working mechanism, and resolutely control market chaos. If suspected criminal issues are discovered, they will be referred to the judiciary.

Tokens or "virtual currencies" used in token issuance financing are not issued by monetary authorities, do not have legal and compulsory monetary attributes, and do not have It has the same legal status as currency and cannot and should not be used as currency for circulation in the market.

2. No organization or individual may illegally engage in token issuance and financing activities

From the date of this announcement, all types of token issuance and financing activities should be stopped immediately. Organizations and individuals that have completed token issuance and financing should make arrangements for liquidation and other arrangements to reasonably protect the rights and interests of investors and properly handle risks. Relevant departments will seriously investigate and deal with illegal activities in token issuance and financing activities that refuse to stop and completed token issuance and financing projects in accordance with the law.

3. "Notice on Further Preventing and Dealing with the Risks of Speculation in Virtual Currency Transactions".

1. Clarify the essential attributes of virtual currency and related business activities

(1) Virtual currency does not have the same legal status as legal currency. Bitcoin, Virtual currencies such as Ethereum and Tether have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed accounts or similar technologies, and existing in digital form. They are not legal and should not and cannot be used as currency for circulation in the market. .

(2) Virtual currency-related business activities are illegal financial activities. Carry out legal currency and virtual currency exchange business, exchange business between virtual currencies, act as a central counterparty to buy and sell virtual currencies, provide information intermediaries and services for virtual currency transactions Pricing services, token issuance financing and virtual currency derivatives Cryptocurrency-related business activities such as biological product trading are suspected of illegal sales of tokens, unauthorized public issuance of securities, illegal futures business, illegal fund-raising and other illegal financial activities, which are strictly prohibited and will be resolutely banned in accordance with the law. shall be held criminally responsible in accordance with the law.

(3) The provision of services by overseas virtual currency exchanges to residents in my country through the Internet is also an illegal financial activity for the domestic staff of the relevant overseas virtual currency exchanges, as well as those who knew or should have known. Legal persons, unincorporated organizations and natural persons that engage in virtual currency-related businesses and still provide marketing, payment and settlement, technical support and other services will be held accountable in accordance with the law.

(4) There are legal risks involved in participating in virtual currency investment and trading activities. If any legal person, unincorporated organization or natural person invests in virtual currency and related derivatives and violates public order and good customs, the relevant civil legal actions will be invalid, and the resulting losses will be borne by them. You shall be responsible for your own responsibility; those suspected of disrupting financial order and endangering financial security shall be investigated and dealt with by relevant departments in accordance with the law.