Beijing's first case has come into effect: Bitcoin "mining" violates the "green principle" of the Civil Code

Source: CCTV news client

On October 25, 2021, the Dongcheng District People's Court of Beijing Municipality pronounced a judgment on the first bitcoin "mining" entrustment contract dispute case, and the parties served the judgment and interest lawsuit, and at present, the judgment has taken legal effect.

The case applied article 9 of the Civil Code to the "green principle", and found that Bitcoin "mining" was a venture capital activity with huge resource consumption, which was not conducive to the realization of the "double carbon" goal, contrary to public order and good customs, and the court finally ruled that the contract was invalid and the loss was borne by itself.

In May 2020, Shanghai Qinju Company, Beijing Yuner Company and Kun kun Company signed the Server Equipment Procurement Agreement, the Project Cooperation Contract and the Cloud Computer Room Special Computing Equipment Service Agreement. The parties agreed to jointly carry out bitcoin "mining" activities, and Yuner Company purchased a professional computing server (i.e. "mining machine") from Kun kun Company in the form of retention-of-title trading, and Qin'er Company authorized Qinju Company to entrust Yuner Company to host the "Mining Machine" on behalf of Yuner Company, and before Yuner Company paid off the "mining machine" payment, the proceeds from "mining" were collected by Qinju Company, and if there was a network failure, power outage and other production accidents, Yuner Company should repair it in time and compensate Qinju Company for losses. During the performance of the contract, the "mining machine" involved in the case was successively operated in the "mine farm" in Zhaotong, Yunnan and Ordos, Inner Mongolia, and there were many power outages during the production process of the "mining machine", which caused Qinju Company to suffer huge economic losses, and demanded that Yuner Company compensate for the loss of 33.01424886 bitcoins caused by the power outage, with a total of 5.3 million yuan after conversion.

Feng Ning, the judge who undertook the case, is an expert in trial business in Beijing. The judge introduced that Bitcoin (Bitcoin) is a virtual currency calculated through a specific computer program, with the characteristics of decentralization, limited total amount, anonymity, etc., is an open source program that combines open source software engineering mode, cryptographic principles and proof-of-work mechanism, participants have the opportunity to obtain a certain amount of bitcoin as a reward after successfully executing a specific algorithm, and the method of obtaining bitcoin through this way is called "mining".

From the perspective of the nature of behavior, Bitcoin is a specific virtual commodity, does not have the same legal status as money, Bitcoin "mining" is essentially a risk investment activity that pursues the returns of virtual commodities, and investors need to bear the relevant investment risks.

From the perspective of the effectiveness of behavior, the power energy consumption of "mining" activities is huge, the average daily power consumption of 685 "mining machines" involved in the case is more than 57,500 degrees, and the production and trading links are easy to threaten financial security, and the speculation risk is prominent, which is contrary to the spirit of the "green principle" of the Civil Code for energy conservation and emission reduction and environmental protection, and belongs to the scope of the phased industries prohibited by investment in the State Council's "Interim Provisions on Promoting Industrial Structure Adjustment" and other administrative regulations, so "mining" related activities violate public order and good customs, and should be invalid.

From the perspective of liability burden, the policy risks, technical risks, and investment loss risks arising from Bitcoin's "mining" activities should be borne by the investors themselves, because the investment entity disregards regulatory regulations, allows risks to occur, and is invalid for the contract, so the relevant loss consequences should also be borne by all parties.

Since the beginning of this year, the Financial Stability and Development Committee of the State Council, the National Development and Reform Commission, the Chinese Bank and other institutions have successively carried out crackdowns and rectification on virtual currency "mining" activities, including "mining" activities in the elimination of industries and prohibiting investment.

The judgment in this case clarifies the nature of venture capital in Bitcoin's "mining" behavior, conveys the judicial attitude of supporting supervision and preventing financial risks, and establishes rules for the exercise of rights and responsibilities of relevant parties, which is of good exemplary significance for guiding market entities to invest rationally, safeguard rights according to law, and enhance risk prevention awareness.

(CCTV reporter Ji Chenghai)