Chinese Court Rules Unpaid Crypto Loans Can Be Repaid Based on What the Lender Originally Paid

A mid level court in Guangzhou, China has made an interesting ruling on what happens when someone borrows cryptocurrency and does not pay it back. According to a report from Guangzhou Daily on 3 September, the court decided that in these situations, the amount owed should be based on what the lender originally paid to buy the coin, not what the coin is worth in the market later on.

The ruling came from the Guangzhou Intermediate People’s Court, and the Guangdong High People’s Court later shared this case as having reference value for other similar disputes going forward.

What actually happened

Back in July 2023, a lender identified only as Jin sent one unit of an unnamed cryptocurrency to a borrower identified as Chang. Chang signed a written agreement promising to return that same coin two days later, by 3 July. The report never names which coin this actually was, which is worth keeping in mind, because a coin like Bitcoin behaves very differently in terms of price swings compared to some smaller or lesser known token, and that detail changes how big a deal this case really is.

The agreement was written in a way that protected Jin no matter which direction the price moved. If the coin’s value went up by the repayment date, Chang would have to pay back the higher price, either in coin or in yuan. If the value went down, Chang would repay based on the original value using either USDT or yuan. On top of that, if payment was late, a penalty interest rate of 24 percent per year would apply.

Chang never returned the coin. The report does not explain why. It is not clear if Chang no longer had the coin, disputed owing it, or simply ignored the agreement altogether. So Jin took the matter to court, asking either for the coin itself to be returned, or for its yuan value based on the Binance exchange rate at the time of the court judgment, along with the additional late payment interest.

It turned out that Jin had originally spent 228,200 yuan on a Chinese platform to buy 1.14 units of this token. Based on that, the court calculated the value of the single coin that was lent out to be 199,600 yuan.

What the court actually decided

The court pointed out that cryptocurrency cannot legally function as actual currency in China. However, it can still be treated as a form of civil property, similar to how online virtual property is treated under the law.

The court ruled that the original repayment agreement itself was invalid. The reasoning was that guaranteeing the lender the higher of two possible prices, and allowing repayment in yuan based on that higher price, was essentially functioning as a cryptocurrency exchange transaction, and that kind of activity is treated as illegal under Chinese financial policy.

Normally, when a contract is ruled invalid, any property exchanged under that contract should be returned. But the court said that actually returning the exact same coin was not realistically practical, so it refused that specific request.

Instead, the court focused on damages. Since cryptocurrency cannot be legally traded or circulated inside China, the court said there is no official domestic market price for it, and no legally recognized way to value it. Because of that, the court decided to use Jin’s original purchase cost as the basis for damages, which came out to 199,600 yuan, or roughly 29,700 dollars.

The court dismissed Jin’s other requests, including the 24 percent penalty interest and any amount above the court’s own calculated figure. The court also added that Jin had made the choice to buy this token through a domestic platform that is not actually authorized to operate that kind of crypto trading business in the first place, and because of that choice, Jin has to accept the risk that the platform’s listed price might be higher than what the court is willing to officially recognize. What is not addressed anywhere is whether that platform is still running today, or whether it faces any consequences of its own for operating without authorization in the first place.

Why the court approached it this way

Since 2021, Chinese policy has been fairly clear that cryptocurrencies are not considered legal currency, and that any related exchange or trading activity counts as illegal financial activity. Under Chinese law, civil agreements that go against public order and general morality are considered void, and in most of these cases, any resulting losses are meant to be carried by the people who chose to participate in that activity.

At the same time, Chinese courts have often still treated cryptocurrency as a form of virtual property rather than treating it as something worth nothing at all. This Guangzhou ruling tries to balance both of these ideas at once. It refuses to enforce any agreement that functions like a crypto to cash exchange or a price guarantee, but it also does not want to let a borrower simply keep the value of an asset they took under a contract that was later ruled invalid, without paying anything at all.

In its official explanation, the court said that using the coin holder’s original purchase cost as the basis for damages is a practical and reasonable approach, especially since China currently has no legally recognized system for pricing these assets.

There is a real tension sitting underneath all of this that the ruling never quite resolves. China’s official position is that crypto has no legitimate market price and cannot be properly valued at all. Yet the court still had to assign it an actual number in yuan to settle a dispute between two private citizens. In other words, the legal system refuses to treat crypto as a real financial asset in principle, while being forced to treat it exactly like one in practice, just to reach a fair outcome. Nobody in this case seems to directly acknowledge that contradiction, but it is arguably the most interesting part of the whole story.

What this ruling does not mean

This ruling is not permission to legally run a crypto lending business inside China. It does not mean that Binance prices, CoinMarketCap prices, or any other overseas pricing source is now considered official. It does not mean that every unpaid crypto loan must always be repaid using the exact same type of coin. And importantly, this ruling is not legally binding across the entire country the way a ruling from China’s Supreme People’s Court would be. The phrase reference value simply means other courts may choose to look at this case for guidance, they are not required to follow it.

In fact, courts in other Chinese provinces have handled similar cases quite differently. Some courts have dismissed crypto loan lawsuits entirely, saying they do not belong in civil court at all, while others have refused to award anything to the lender. This particular Guangzhou case sits somewhere in the middle of that wider disagreement between courts.

A practical way to understand this

If a similar case were to come up again, three specific details in this case mattered a lot to the outcome. The transfer of a specific coin was clearly proven. The lender was able to show an actual yuan payment used to buy that coin. And the original repayment agreement looked very similar to a currency exchange combined with a price guarantee. If even one of these three details were missing or different, another court could easily choose to dismiss a similar case entirely instead.

There is also a quieter question worth thinking about here. If courts keep landing on original purchase cost rather than current value as the standard way to settle these disputes, does that end up creating a strange incentive for borrowers. If someone borrows crypto and the price shoots up, and they know the worst case outcome in court is simply paying back the old, lower price, there is not much reason for them to hand back the coin at all. That is not something the ruling addresses, but it feels like a logical gap worth watching if more of these cases start showing up.

And even after all of this, winning in court and actually getting paid are two very different things. Nothing in this case confirms whether Chang actually has the money to pay the 199,600 yuan, or whether Jin will now need to go through a separate process just to collect it. A judgment on paper does not always translate into money in hand.

Anyone holding a crypto related IOU under Chinese law should understand that this ruling represents one particular court’s approach to calculating damages after a contract was ruled invalid. It should not be treated as a guaranteed legal strategy or a reliable way to recover crypto debts, since the next court to hear a similar case could just as easily decide things very differently.