BTC mining contract ruled to be invalid as Chinese court rejects compensation claims

A court in China has ruled against a plaintiff who was suing a BTC block reward mining operator for breach of contract. The court in the capital of Beijing ruled that the contract was invalid as mining is illegal in the country. Additionally, it turned over all records in the case to national authorities so they could shut down the mining operation.

China has cracked down on block reward mining in the past year, effectively pushing out most of the miners from the country that once hosted 75% of the BTC hash rate. And while it hasn’t been clear what direction legal disputes involving the now-illegal industry would take, the Chaoyang District People’s Court in Beijing has given a glimpse into the future of digital currency-related court rulings.

The lawsuit was filed by Fengfu Jiuxin company, which according to court filings, entered into three agreements with blockchain company Zhongyan Zhichuang in 2019 when mining was still legal and China was the dominant player.

As part of the agreements, the plaintiff paid the defendant 10 million yuan ($1.6 million) for the purchase and deployment of mining machines in the Liangshan Yi Autonomous Prefecture in Sichuan province.

At the time, China was almost begging miners to set up operations in the country. Provincial administrations in the Asian country were issuing incentives to several companies so that they could consume the excess hydro-electric energy in production. Zhongyan was one of those that was taking investment and doing all the hard work of setting up the mining operations.

However, it all changed this year with the Xi Jinping government outlawing block reward mining. By the time the ban took effect, the plaintiff had only gained 18.35 BTC from the operation, worth about $900,000 at the current prices, but much lower when they got paid.

The company, in its lawsuit, demanded 278.17 BTC ($13.6 million) in compensation and damages.

The Beijing court has ruled against the plaintiff. According to the verdict, the relevant property rights relating to the block reward mining contract are invalid and not protected by the Chinese law.

The court didn’t just stop with the rejection of the claims. It informed the National Development and Reform Commission in Sichuan of the operation so it could crack down on it. The commission has been spearheading the government’s efforts against miners.

This is not the first time a Chinese court has declared a verdict against digital currencies. As CoinGeek reported, in August this year, a man lost $10,000 after a court in Jinan city ruled against him. The court ruled that digital currencies don’t have legal status.

Watch: CoinGeek New York panel, How to Achieve Green Bitcoin: Energy Consumption & Environmental Sustainability

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