Chinese Court Rules: Tether Not Legal Tender

In a significant ruling, a Chinese court in Jiangsu Province has determined that Tether, a popular stablecoin, does not have legal tender status. The decision was made in the context of a civil dispute involving a virtual currency loan.

The case involved two individuals, Han and Ji, who had engaged in a virtual currency transaction. Ji, using Han's phone, purchased 2000 Tethers on Han's behalf and claimed to manage them. However, when it came time to receive the returns, Ji failed to fulfill his promise, leading to a dispute. The two parties later agreed to transform their transaction into a loan relationship, with Ji issuing a promissory note for 15,000 yuan to Han. Despite this, Ji still did not repay the loan, prompting Han to sue Ji in court.

During the trial, the court cited the "Notice on Further Preventing and Disposing of Risks Associated with the Hype of Virtual Currency Transactions" issued by ten departments, including the People's Bank of China, the Cyberspace Administration of China, and the Supreme People's Court. The notice states that virtual currencies are not issued by monetary authorities, do not have legal tender status, and should not be used as currency circulating in the market. The court ruled that since Tether is not a legal tender, Han had not fulfilled his obligation of delivering the loan under the loan agreement. Therefore, the loan agreement between the two parties was not established, and Han's claim for repayment lacked factual and legal basis.

This ruling has significant implications for the virtual currency market in China. It underscores the government's stance on the legal status of virtual currencies and serves as a reminder to investors of the risks associated with these assets. As the market continues to evolve, it is crucial for investors to stay informed about the regulatory environment and the legal status of the virtual currencies they invest in.