Illegal ≠ Non-arbitrable

In recent years, with the open policies toward cryptocurrencies in regions such as the United States and Hong Kong and the gradual exploration of blockchain technology in China, the global cryptocurrency wave has continued to heat up. Many financial institutions, traditional capital, and even some government departments have come to recognize the asset and investment attributes of cryptocurrencies and no longer view crypto solely as an empty scam. At the same time, more and more people are eager to try their hand, and many, attracted by stories of friends and relatives "getting rich quick by trading coins," have rushed to participate in cryptocurrency transactions.

Since the 2021 "924 Announcement" characterized cryptocurrency trading as illegal financial activity, there has been no relaxation at the policy level in China. But four years later, the temperature gap between policy and the judiciary is becoming pronounced. On the one hand, the regulatory stance remains strict; on the other hand, courts in first-tier cities have begun attempting to handle cryptocurrency-related disputes in a layered manner in civil adjudication, partially supporting related civil claims, reflecting a trend of "prudent acceptance."

Today, by analyzing these cases, we will look at the latest views of courts across various regions this year on coin-related cases.

(Friendly reminder: China is not a country of case law; courts refer to past precedents when adjudicating cases, but this is not absolute.)

 

Borrowed USDT not repaid? The court orders you to repay!

In June 2024 and January 2025, Wen borrowed 6,500 USDT and RMB 14,400 respectively from Mao for coin trading. Mao agreed to the loans and transferred the funds in multiple installments to Wen's USDT account. Borrowing USDT is easy, but repaying it is hard; after Mao repeatedly demanded repayment without success, Mao took the IOU and sued Wen in court. [Case No.: (2025) Zhe 0109 Min Chu No. 4938]

The Xiaoshan District Court of Hangzhou held that the private lending relationship between the parties was lawful and valid, and ordered Wen to return all principal and interest to Mao.

In the view of Mankun lawyers, this is a relatively bold judicial decision in recent years, recognizing the validity of borrowing USDT. In the judgment, the 6,500 USDT was converted into fiat currency at the then exchange rate of 1:7.3, and Wen was ordered to return the corresponding amount in RMB. Compared with cases in earlier years where claims were dismissed or not accepted at all, this court's attitude toward cryptocurrencies has changed somewhat.

 

After successfully buying coins, can I just request a refund? No!

In some past judicial cases, we have seen some courts hold that coin-related transactions are invalid for violating public order and good morals, and that completed coin-related transactions require restitution.

Against this backdrop, some buyers who successfully purchased cryptocurrencies have had crooked ideas, attempting to package transfers for purchasing cryptocurrencies as loans, fraud, or other forms and sue in court to try to slip through. But times are no longer what they were; many courts have in fact acquired some knowledge of blockchain transfers, and even the Shenzhen court mini-program already offers blockchain evidence verification services.

Below, two recent cases are shared to show how courts handle buyers who seek a refund only.

  • Case 1: (2025) Yu 9001 Min Chu No. 3862

Facts: On February 2, 2023, Zheng transferred RMB 10,000 to Zhao via WeChat. Zheng sued, asserting that the sum was a loan and demanding that Zhao repay the principal. Zhao argued that no lending relationship existed between the parties and that the RMB 10,000 was part of the price for 2,100 USDT in virtual currency (unit price RMB 7, total value RMB 14,700), with RMB 4,700 remaining unpaid, and that the USDT had already been delivered through the “Yi Sheng Tai Platform.”

Court's view: Zheng provided only WeChat transfer records and failed to prove that a lending relationship was established. Zhao provided WeChat chat records and other evidence proving that the RMB 10,000 was payment for the purchase of USDT and that 2,100 USDT had been delivered. In light of the case background, the court held that no lending relationship was established. With reference to the Notice of the People's Bank of China and Ten Other Departments on Further Preventing and Handling the Risks of Speculation in Virtual Currency Trading (Yin Fa [2021] No. 237) and Article 157 of the Civil Code of the People's Republic of China, virtual currency trading constitutes illegal financial activity, the related civil acts are void, and the parties bear their own losses.

Lawyer's comment: In this case, after paying part of the transaction consideration, the plaintiff attempted to claim restitution in the name of a “lending dispute,” which is a typical “buyer's-remorse-style assertion of rights.”

After clarifying the factual background, the court did not uphold the claim, reflecting an improved ability to identify the actual transaction intent behind virtual currency dealings and to ascertain the facts.

  • Case 2: (2024) Zhe 0122 Min Chu No. 4242 

Facts: The plaintiff, Wang, claimed that he was induced by the defendant, Li, to participate in virtual currency USDT investment and that during 2021 he transferred a total of RMB 760,000 to the defendant through various means, entrusting the defendant to purchase USDT. After receiving the funds, the defendant, Li, transferred part of the funds to non-parties Zhou, Hua and others for the purchase of USDT.

The plaintiff asserted that the defendant did not actually purchase USDT and that changes in the platform account were caused by data modification, and demanded return of the funds and interest. The court found that the plaintiff's entrustment of the defendant to purchase virtual currency constituted a commission contract relationship, but because virtual currency trading constitutes illegal financial activity, the contract was held void.

Court's view: The court held that this case is a commission contract dispute; the plaintiff, Wang, entrusted the defendant, Li, to purchase USDT, and participation in virtual currency investment constitutes illegal financial activity, violates public order and good morals, and the contract is void.

The bank statements provided by the defendant showed that after receiving the plaintiff's funds, the defendant transferred funds to third parties to purchase USDT. The plaintiff failed to prove that the defendant modified the platform data, and the claim for restitution was not upheld. Under the relevant provisions of the Civil Code, after a contract is void, the parties shall return property acquired under the void contract; however, the defendant did not profit from the transaction, and the funds had been used to purchase USDT. The existing evidence was insufficient to support the plaintiff's claim, and therefore all claims were dismissed.

Lawyer's comment: In this case, Wang first claimed that he had been defrauded into buying USDT, and then claimed that the platform data had been modified and the USDT had not arrived. With this combination of blows, even Tyson would probably be somewhat dazed. The defendant merely helped Wang buy USDT and did not profit from it, yet was required to return the plaintiff's huge sum of RMB 760,000, facing a situation of losing both the money and the currency.

Fortunately, after clarifying the facts of the case, the court rendered a fair judgment.

These are two typical cases of buying and selling USDT: one involves purchasing directly from a USDT dealer, and the other involves entrusting another person to purchase indirectly. Setting aside the crypto attribute, these are in fact simply a sales contract and an entrustment contract. As we can see, where both parties voluntarily complete a transaction, although a contract involving cryptocurrency trading is invalid, the court will still ascertain the facts and restore the essence of the transaction by examining the transaction background, the evidentiary materials of both parties, and both parties' understanding of cryptocurrency, and will flexibly apply the relevant legal provisions to properly resolve the dispute between the parties.

Therefore, after a successful transaction, a buyer who seeks to recover fiat currency unilaterally through various causes of action (unjust enrichment, loan contract dispute, invalidity of civil juristic acts, etc.), hoping for a refund only or to acquire goods for zero cost, should save their effort.

 

Wasn't it said that risks are borne by the parties themselves? Why did the court support a refund!

  • Case One: A Principal-Guarantee Commitment Gives Rise to Liability

Case facts: Starting in September 2023, the defendant, Wang, induced the plaintiff to invest on the grounds that investing in Tether (USDT) on a certain exchange could yield high returns, and on September 19, October 21, and November 15 issued Letters of Guarantee promising to compensate the principal and returns if the investment failed. The plaintiff transferred RMB 1.5899 million to the defendant and to designated accounts, and the defendant purchased USDT worth RMB 1.6 million for the plaintiff. In early 2024, the exchange ceased trading, and the plaintiff's demand for return of the principal was unsuccessful; the defendant repaid only RMB 538,287.4, leaving RMB 1,051,612.6 unpaid. [(2025) Zhe 0127 Min Chu No. 331]

Court holding: The plaintiff, Wang, entrusted the defendant, Wang, to invest in Tether (USDT). Because virtual currency is not legal tender and the transaction violated financial security and public order and good morals, it constituted an invalid contract. The plaintiff should bear the adverse consequences of the investment failure, but the defendant, through the Letters of Guarantee, promised to compensate the principal and returns and induced the plaintiff to invest; the defendant was at fault and should bear corresponding liability. The court, in its discretion, held the defendant liable for 60% of the remaining investment amount of RMB 1,051,612.6, namely RMB 630,967.56, and dismissed the plaintiff's other claims.

Lawyer's comment: Where a contract is invalid and both parties are at fault, each bears corresponding liability. The plaintiff, in entrusting the defendant to invest in cryptocurrency, failed to exercise due prudence and was partly at fault, while the defendant's inducement of the investment accounted for the primary liability. Ultimately, based on the principle of fairness, the court held the defendant liable for 60% of the principal.

  • Case Two: Money Received but No Coins Delivered; Court Supports Refund

Case facts: This case involves a contract dispute between the plaintiff, Xu, and the defendant, He, and the core facts concern the purpose of the plaintiff's transfer of RMB 10,000 to the defendant in July 2023 and the subsequent dispute. The plaintiff asserted that the payment was a service fee for the defendant's recommendation of a high-yield stock investment. The defendant insisted that the RMB 10,000 was used by the plaintiff to purchase virtual currency (CG coins) through the CG platform for football betting. [(2025) Yue 0104 Min Chu No. 16716]

Court holding: The plaintiff's claim of a stock investment service fee lacked sufficient evidence; a transfer record alone was insufficient to prove that a stock trading service agreement existed between the plaintiff and the defendant. The defendant admitted receiving the RMB 10,000 and stated that it was for a virtual currency transaction, but that transaction violated China's financial policies, was unlawful, and was not protected by law. However, the defendant could not prove that the virtual currency had been delivered, and the platform could no longer be logged into. Ultimately, based on the relevant provisions of the Civil Code, the court ordered the defendant to refund the RMB 10,000.

Lawyer's comment: This is a counterexample to the so-called zero-cost acquisition discussed above; it is also impermissible for a so-called seller to take the money without delivering the coins.

  • Case 3: A subsequent promise is valid

Facts: The plaintiff, Yi, and the defendant, Shen, had been friends for many years. Yi was engaged in foreign trade with Ukraine, and remittances had become difficult because of the Russia-Ukraine war. In June 2023, Shen recommended to Yi a "reliable" remittance agency channel and introduced Zhong, a person not party to the case, stating that Zhong had a contact in Dubai who handled remittances of trade payments. On June 27, at Zhong's request, Yi, through his employee "Dazhi" in Ukraine, converted USD 43,000 into USDT virtual currency and transferred it to Zhong, intending to exchange it into RMB and repatriate the funds, but Yi did not receive the money, and Zhong subsequently became unreachable. On June 29, Yi went to Huzhou to communicate with Shen in person. In the early hours of July 3, Shen admitted that he had "given a guarantee" assuring the safety of the funds and agreed to bear liability of RMB 160,000, paying RMB 60,000 first and the balance within three months, but to date he has not paid. [(2024) Zhe 0502 Min Chu No. 3012]

Court's view: The plaintiff, Yi, and the defendant, Shen, formed an intermediary contract relationship, under which Shen introduced Zhong to provide remittance agency services to Yi, and Yi converted US dollars into USDT virtual currency and delivered it to Zhong for exchange into RMB. Because virtual currency transactions violate China's foreign exchange management system and public order and good morals, the intermediary contract is invalid. However, in the communication on July 3, Shen promised to pay RMB 160,000 and agreed on a payment time, forming a new valid contract; that promise is independent of the invalid intermediary contract, does not violate public order and good morals, and should be protected by law. Shen failed to perform as agreed, constituting breach of contract, and must pay RMB 160,000 plus corresponding interest.

Lawyer's comment: Private foreign exchange exchange is unlawful and is not protected by law. However, in this case, the court supported the refund for a very important reason: the defendant promised to repay.

 

Lawyer's summary

Judging from a number of judgments in 2025, although regulatory policy still maintains the characterization of an "illegal financial policy," some courts have already shown more nuanced judicial judgment in specific cases:

  • If the cryptocurrency has already been delivered, and the buyer claims return on grounds such as price fluctuations, courts tend to dismiss the claim.

  • If one party has not completed its delivery obligation, courts support a refund.

  • If one party engaged in conduct in the process such as inducing investment or promising principal protection, courts may also, in their discretion, assign liability based on the fairness principle of the Civil Code.

From these judgments, we can sense that judicial organs are attempting to seek a more nuanced adjudicative balance between the compliance bottom line and real-world transactions.

For ordinary investors, when participating in transactions, they should still strengthen risk awareness and clarify the boundaries of liability. Where necessary, they may fix the transaction process of both parties through contracts and written communication records, and clarify the substance of the transaction, for contingency purposes.