Discussion on the Legal Effect of the Cooperation Protocol for the Judicial Disposal of Virtual Money

Recently, a case concluded by a certain court in Urumqi, Xinjiang has sparked discussions regarding the legal validity of the cooperation agreement on the judicial disposal of Virtual Money. This article will explore the legal status of the agreement and provide some suggestions for relevant practitioners.

Case Summary

In November 2023, Sun signed the "Virtual Money Asset Handling Cooperation Contract" with Lu, agreeing that both parties would cooperate in the judicial disposal of virtual money. Sun paid 200,000 yuan as a performance deposit, which was kept by Lu. During the cooperation period, a dispute arose, and Sun filed a lawsuit in December 2024 requesting the termination of the contract and the return of the deposit along with interest.

Court Ruling and Its Basis

The court ruled that the contract was invalid and dismissed Sun's request for the return of the deposit.

Reasons for Invalidity of the Contract

The court cited the "Announcement on Preventing the Risks of Token Issuance Financing" issued in 2017, believing that the actions of both parties indirectly supported the exchange of Virtual Money and fiat currency, which violated the public interest; therefore, the contract was declared null and void.

Reasons for not refunding the margin

The court ruled that the two parties constituted an actual partnership. According to the Partnership Law, before the termination of the partnership, partners are not allowed to request the distribution of partnership property, therefore the demand for the return of the deposit is not supported.

Disputed Points of Court Judgment

1. Inappropriate applicable regulations: The 2017 announcement cited by the court mainly targets ICO activities and is not applicable to judicial disposal activities. The 2021 notice on "Further Preventing and Dealing with Risks of Speculation in Virtual Money Transactions" is more relevant, but still insufficient to directly negate the validity of such cooperation protocols.

2. Ignoring the legality of judicial disposal: The judicial disposal of virtual money is a legal and compliant business, essentially a judicial activity, similar in nature to the court's entrustment of a third-party platform to dispose of property involved in the case.

3. Offshore disposal operations not considered: Compliant judicial disposal usually involves cashing out Virtual Money overseas, and then converting the funds back into the country, in accordance with existing regulatory requirements.

4. Doubts in the determination of partnership: There may be insufficient evidence to support the classification of the margin as a partner contribution.

Suggestions for Practitioners

1. Gain a deeper understanding of relevant laws and regulations, especially the latest regulatory policies.

2. Clearly distinguish the different nature between judicial disposal and ordinary Virtual Money transactions.

3. Clearly specify the overseas disposal and fund settlement process in the cooperation protocol.

4. Retain complete evidence of cooperation to avoid being mistaken for a partnership.

5. When encountering similar legal issues, seek professional legal advice in a timely manner.

Conclusion

The judicial disposal of virtual money is an emerging yet increasingly mature field. Although the current regulatory environment is strict, legal and compliant disposal methods have become a consensus in the industry. As knowledge in this area becomes more widespread, the understanding of virtual money by judicial authorities will inevitably improve, and the handling of related cases will become more reasonable. Practitioners should continue to pay attention to industry dynamics, strictly adhere to laws and regulations, and ensure that business operations are conducted in compliance.