China’s Internet Court Reaches Decision on First Bitcoin Mining Machine Dispute

作者: Roy Cai
The court ruled that possessing and generating Bitcoin legally and trading Bitcoin mining machines is lawful in China.

The Hangzhou Internet Court concluded China’s first Bitcoin mining machine dispute on September 10. The court ruled the Bitcoin mining machine contract legal and valid in this case and dismissed the plaintiff’s claim for contract termination and interest compensation.

Last year, the Hangzhou Internet Court was established to handle disputes over Internet-related issues such as e-commerce disputes, domain name conflicts and intellectual property rights infringements. On June 27, the Hangzhou Internet Court ruled on a copyright infringement case, which was the first time blockchain-backed digital evidence was accepted.    

On January 4, Chen, the plaintiff, purchased 20 Bitcoin mining machines from a seller online, worth a total of about $87,500. Chen filed a lawsuit with the court after his refund requests were rejected by the seller.

Chen believed that the mining machine deal was illegal due to the ban on cryptocurrency trade and the ban on ICOs issued by the Chinese central bank. Chen also believed that the request complied with the consumer rights law on unconditional refunds within seven days of receiving the goods given that the request was put forward before the goods were received.  

After the hearing, the court announced that the sales contract, in the form of data messages between the two parties, was a lawfully formed contract. China’s laws and administrative regulations do not prohibit possession, mining or circulation of Bitcoin, nor do they prohibit the trade of Bitcoin mining machines. Therefore, the plaintiff’s claim was deemed untenable and it was determined that the contract involved in the case was legal and valid.

The consumer rights law on unconditional refunds within seven days serves as a solution when there is asymmetric information between the buyer and an online seller leading to misrepresentation of the truth. In this case, the plaintiff’s request for a refund was motivated by their recognition of financial regulations after the contract was signed rather than asymmetric information. Thus, the law on an unconditional refund within seven days does not apply in this case.

Finally, the court dismissed the plaintiff’s request for contract termination and interest compensation from the defendant due to a lack of legal and factual evidence.