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Cryptocurrency-Related Investment Disputes Are On The Increase In China

The number of court cases involving cryptocurrency investment disputes reached a record high in 2020. Altogether, the year recorded 872 cryptocurrency-related cases, higher than about 700 of similar cases that were recorded in the previous year, 2019. Some of the most popular of the cases include the Bitmain and Poolin Competition Agreement, China’s OTC King Zhao Dong and Plustoken.

The blockchain and cryptocurrency industry has continued to grow at an increasing pace. While Bitcoin was created as an alternative transaction system, other blockchain products have emerged, most of them with associated cryptocurrencies to serve different purposes. These developments have engineered the creation of an entire ecosystem that comprises different aspects. These aspects include cryptocurrency mining, exchanges, stablecoins, decentralized finance (DeFi), among others.

The development of the blockchain and cryptocurrency industry has created a trend and a market that has arrived with its own complications and complexities. Monetary interactions across parties and associated investment exercises have given rise to disagreements and disputes, many of which have ended in the courts. The absence of definite regulatory frameworks haven’t helped in solving this problem either.

China is a Big Market

The Chinese government is famous for its clampdown over the years on cryptocurrencies. Perhaps, it is a position that it has taken having understood the peculiarity of its environment, especially when it comes to tech-related investments.

China is a frontline country when it comes to technological awareness. Also, in terms of population, 18.47% of the world’s population reside in China, making it the most populous country in the world. A combination of these two characteristics makes China an attractive market for innovative products, especially in the area of emerging technologies. Hence, it does not come as a surprise why China was a hub for most cryptocurrency projects in the early days of the industry.

As reported on China Judgment Document Network, cryptocurrency related litigations in Chinese courts were only 12 in 2014. The number of cases rose to more than 100 in 2017 and as at 2020 it stands at 872. Perhaps this number could have been more if the government of China had not taken the strict measures that it had put in place since 2017. Apparently, the government may have shown a full understanding of its domestic challenges when it comes to issues of tech and investment.

Increasing Cases May Mean Increasing Awareness

The nature of the pending cases in Chinese courts that revolve around cryptocurrency investments include; illegal possession, loans, MLM. However, the two major classifications of these cases are “Criminal cases” and “Civil cases”, depending on the interpretation of the law.  In terms of regional spread, these cases cover many regions in China which include; Guangdong Province, Zhejiang Province, Henan Province, Jiangsu Province, Sichuan Province, Shanghai, Beijing, Shandong Province and Heilongjiang. 

While the emergence of disputes are largely perceived as a negative development, there is also the opinion that the rising number of crypto-related litigations means that the industry is gaining more awareness and that cryptocurrencies are becoming more adopted in the mainstream.

In his interview with Eastmoney, Liu Yang, a consultant and lawyer from Beijing Deheng Law Firm noted that cryptocurrency is getting more attention from the general public. According to him, Bitcoin is gradually getting “out of the circle”, therefore more and more people are learning about it and also making investment attempts. This is one of the reasons why the number of disputes is on the rise.

With respect to the regional concentration of the lawsuits, Yang said;

The acceptance of digital currency has a strong regional character. Guangdong and Zhejiang are the cities with the fastest development speed and the most advanced development concepts in the country. The public has a relatively high degree of acceptance of virtual digital currency, and a strong currency circle culture has formed in cities such as Shenzhen and Hangzhou; the situation in Sichuan is relatively special, such as Aba, etc. The land has abundant hydropower resources, and electricity prices are cheaper during high water periods, attracting Bitcoin mining operators to settle in, and lawsuits triggered by mining machines are not rare.


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