Borrower Defaults on Crypto Loan, Triggering Landmark Case
On July 1, 2023, a borrower surnamed Chang signed a promissory note with a lender surnamed Jin. The deal: borrow one unit of cryptocurrency, give it back by July 3. If the coin was worth more on the repayment date than it had been on the lending date, Chang had to repay at that higher value, either in crypto or the renminbi equivalent. If the price dropped, Chang would return the equivalent in USTD or renminbi, pegged to the lending-date price. Miss the deadline? A penalty rate of 24% per annum kicked in from the overdue date.
Jin sent one unit of cryptocurrency to Chang through an online platform on July 1, 2023. Chang did not return it on time. The court file showed Jin had spent 228,200 yuan in total to buy 1.14 units of the cryptocurrency on that same platform.
Jin sued, asking the court to order Chang to return the cryptocurrency and cover losses from the overdue date. Or, if not that, Jin wanted compensation based on the crypto-to-renminbi exchange rate shown on Binance when the judgment took effect.
Court Voids Repayment Clause, Awards Cost-Based Damages
The Guangzhou Intermediate People's Court saw the repayment clause for what it was: a shield for Jin against any fall in cryptocurrency prices. Tie repayment to whichever price was higher — the lending date or the return date — and Jin keeps the upside, plain and simple. If Chang paid in renminbi under that setup, it would, in substance, be a cryptocurrency-to-fiat exchange. So the court invalidated the repayment clause.
Void contract. Then what? In principle, property received under it should be returned. But here, the court said returning the cryptocurrency was objectively impossible, so it rejected that request. Chang still had to answer for Jin's financial losses.
In the end, the court ordered Chang to pay Jin 199,600 yuan — the pro-rata acquisition cost of one unit of the cryptocurrency — and threw out the rest of the claims.