Where to file a lawsuit for disputes involving virtual currency transactions?
TechFlow Selected TechFlow Selected
Where to file a lawsuit for disputes involving virtual currency transactions?
It is best to agree on jurisdiction for virtual currency transactions in Shanghai or Beijing; if no agreement exists, actual transactions should be arranged in Beijing or Shanghai as much as possible.
Navigating Web3 tides with focused insights01 Case Introduction
Mr. A from Beijing was introduced online by a mutual contact in the crypto community to Mr. B from Shenzhen. Mr. A expressed interest in purchasing USDT (hereinafter referred to as "U") from Mr. B. After agreeing on pricing, they decided to conduct an initial transaction to test the waters. Both parties arranged to meet in person in Shanghai for a cash-for-U handover. Upon meeting, they hit it off immediately, feeling a strong rapport, and thus agreed to continue their business relationship. Their transaction volume steadily increased—from several thousand U to hundreds of thousands U.
On one occasion, Mr. A traveled from Beijing to Shanghai as usual for the transaction, while Mr. B arrived late from Shenzhen. Mr. B explained that his cold wallet had just been hacked and he might need a few more days to gather enough U to deliver. Mr. A said it was no problem and pre-paid the cash, receiving a receipt from Mr. B in return. Subsequently, Mr. A repeatedly followed up about the U delivery, but Mr. B consistently claimed he was short on U and needed more time—eventually suggesting he could only refund the money instead. Sensing something was off, Mr. A began investigating and discovered the truth: due to the current uptrend in USDT prices, Mr. B had no intention of fulfilling the original agreement and was simply stalling. Enraged, Mr. A felt disrespected and decided to sue Mr. B to compel performance of the contract. However, unsure where filing suit would give him the best chance of success, Mr. A turned to Manqin Law for advice.
When disputes arise over cryptocurrency transactions, choosing the right jurisdiction can significantly impact the likelihood of a favorable outcome. This involves addressing two critical issues simultaneously: first, whether the case can be accepted by the court—i.e., jurisdiction; second, whether the court will support the claims after accepting the case—i.e., adjudication. Both must be properly resolved. Otherwise, if the case cannot be filed or is dismissed upon review, you remain outside the judicial system; even if accepted, if the court refuses to uphold your claim, it’s like digging a grave without burying the body—futile. In short, getting into court and winning inside court are two different matters. To win a lawsuit, both aspects must be handled firmly and effectively. It should be noted that this article focuses primarily on disputes between domestic individual crypto traders, not those involving platforms—especially foreign exchanges—or customer-platform conflicts.
02 Judicial Reality: Acceptance of Cryptocurrency Transaction Disputes
Currently, disputes related to buying and selling cryptocurrencies face a complex landscape regarding jurisdiction and adjudication. According to the joint notice issued by the People's Bank of China and nine other ministries titled "Notice on Further Preventing and Dealing with Risks of Cryptocurrency Trading and Speculation" (hereinafter referred to as the "Ten-Ministry Notice"), virtual currencies lack legal tender status and should not, nor can they, circulate as currency in the market. Crypto-related business activities—particularly fiat-to-crypto exchange services—are classified as illegal financial activities and have been strictly prohibited.
As a result, the first major obstacle in crypto-related disputes is that courts often refuse to accept such cases or dismiss them outright, citing the illegality of cryptocurrency transactions and stating they fall outside judicial oversight. Even when cases are accepted, contracts involving cryptocurrency sales are frequently declared void by courts. Furthermore, there is no uniform standard for handling restitution following invalidation of such transactions. For example, in disputes over investment returns, courts may rule in favor of full repayment, split losses equally, or deny any refund altogether—reflecting inconsistent judicial tendencies.
In most jurisdictions—including Guangdong, Jiangsu, and Zhejiang—courts are likely to deem cryptocurrency purchase agreements invalid. However, some local courts hold contrary views. The Shanghai No. 1 Intermediate Court has ruled that although virtual currencies are not legal tender, they constitute protected digital assets with exchange value, thereby adopting a more positive stance toward crypto transactions (see Shanghai No. 1 Intermediate Court judgments (2019) Hu 01 Min Zhong 13689 and (2020) Hu 01 Min Zhong 12524; similar precedents include Pudong New Area Court (2022) Hu 0115 Min Chu 16440). The Beijing High Court has also recognized that cryptocurrencies can function as tradable goods, and that private individuals trading such assets do not engage in token issuance financing, thus not violating mandatory provisions under Chinese law or policy (Beijing High Court (2020) Jing Min Zhong 747). Yet even within the same region, differing judicial attitudes exist. For instance, Fangshan District Court in Beijing aligns with the Beijing High Court in recognizing the validity of crypto transactions ((2019) Jing 0111 Min Chu 21131), whereas the Beijing Third Intermediate Court and Chaoyang District Court have invalidated委托investment contracts tied to cryptocurrencies ((2021) Jing 03 Min Zhong 10254, (2021) Jing 0105 Min Chu 97473), possibly because these agreements were made after the issuance of the "September 4 Announcement," rendering the entrusted activities unlawful.
Therefore, for individual crypto traders, the enforceability of contractual rights hinges crucially on where the dispute will be heard. If, based on agreement or applicable law, the case falls under the jurisdiction of courts in Shanghai or Beijing, there is a high probability that the transaction will be deemed valid, allowing courts to allocate obligations according to the parties’ prior arrangements. Conversely, elsewhere, the transaction is far more likely to be declared void. And what follows invalidation? That depends on wildly divergent—and sometimes conflicting—judicial trends across regions. Compared to the relative certainty of having a crypto transaction upheld in court, enabling smooth trading and speculation, being caught in a zone where transactions are voided with unpredictable consequences creates a sense of playing cards with Yama (the King of Hell) or dice with God—an unsettling gamble.
03 General Rule: Determining Jurisdiction Based on Agreement or Law
How should jurisdiction over crypto disputes be determined? Under the Civil Procedure Law and its judicial interpretations, crypto-related disputes follow the principle of “agreed-upon jurisdiction first, statutory jurisdiction otherwise.” Specifically, lawsuits arising from contract disputes shall, if there is a valid agreement, be governed by the designated forum; absent such an agreement, jurisdiction lies with the people's court at either the defendant’s domicile or the place of contract performance.
For agreed jurisdiction: (1) the agreement must be in writing; (2) the chosen location must have a real connection to the dispute—such as the defendant’s residence, place of contract formation, plaintiff’s residence, place of performance, or location of the subject matter—and cannot be arbitrarily selected; (3) the agreement must not violate rules on exclusive or hierarchical jurisdiction.
When the contract does not specify or clearly define the place of performance, statutory jurisdiction applies. Where the disputed obligation involves payment of money, the recipient’s location is considered the place of performance and hence the jurisdictional venue. Where the dispute centers on delivering U, jurisdiction lies with the seller’s domicile—the party obligated to deliver. For instant, settled transactions, jurisdiction belongs to the place where the transaction occurred. Notably, the term “disputed subject” refers to the specific contractual obligation targeted by the plaintiff’s claim ((2021) Zui Gao Fa Zhi Min Xia Zhong 73 Ruling). Simply put, merely seeking monetary compensation does not automatically mean jurisdiction lies with the payee’s location. One must examine the underlying basis: if claiming money based on a valid contractual obligation, then the payee’s location governs; however, if the claim arises from contract invalidity or breach leading to monetary restitution, it cannot be simplistically assumed that jurisdiction rests solely with the payee’s domicile.
04 Specific Analysis: Choosing the Dispute Resolution Venue in Crypto Cases
From the above analysis, selecting the proper venue for resolving crypto disputes is truly a strategic advantage—“who controls the ground, controls the game.” The optimal answer now becomes clear. If the contract designates Shanghai as the jurisdiction, or if litigation can proceed in Shanghai despite lacking an explicit clause, the path from filing to enforcing crypto-related claims will be smooth and unimpeded. Conversely, if jurisdiction—by agreement or by law—falls outside Shanghai or Beijing, the process turns into a legal lottery—fraught with obstacles and uncertainty. As previously discussed, given current judicial practice, specifying a jurisdiction in Shanghai or Beijing (and naming specific districts such as Pudong, Minhang, or Fangshan) greatly increases the chances of successful filing and favorable rulings supporting the validity of crypto transactions. On the other hand, choosing venues outside Beijing and Shanghai risks stumbling at the filing stage; even if the case slips through, courts are highly likely to invalidate the transaction. While invalidation doesn’t erase all legal consequences, the resulting restitution of property remains highly uncertain.
That said, it would be inaccurate to claim that areas beyond Beijing and Shanghai uniformly adopt a “ban-first, regulate-never” approach. For example, the Cangzhou Intermediate Court in Hebei Province ruled: “…although the aforementioned documents prohibit institutions and individuals from engaging in token issuance financing and deny Bitcoin’s status as legal tender, they do not negate its property attributes as a commodity. Ordinary citizens retain the freedom to hold and trade such assets at their own risk” (Cangzhou Intermediate Court (2020) Ji 09 Min Zhong 4997; Guangxi courts share similar views, e.g., (2021) Gui 06 Min Zhong 1365). Meanwhile, Baoshan District Court in Shanghai found that purchasing Tron (TRX) involved illegal public fundraising, rendering related委托investment agreements invalid ((2020) Hu 0113 Min Chu 2912). Nevertheless, it remains true that, based on prevailing judicial trends outside Beijing and Shanghai, pursuing litigation for crypto disputes carries significantly higher risks in terms of case acceptance, validity determination, and post-invalidity remedies. “Caution advised for transactions outside Beijing and Shanghai!” One must acknowledge that only megacities like Beijing and Shanghai stand at the forefront, pioneering progressive recognition of digital asset transactions—true lighthouses in the crypto world and havens for traders—making them the preferred jurisdictions for crypto litigation.
If no jurisdictional agreement exists, then statutory jurisdiction applies—determined by either the plaintiff’s residence or the place of performance. Under statutory rules, if either location is in Shanghai or Beijing, seize the opportunity immediately! Lock it down with 100% determination. Because once multiple venues qualify and another party files first in a non-Beijing/Shanghai court, duplication of proceedings is generally barred. Filing a crypto dispute outside Beijing and Shanghai means navigating a minefield: potential rejection at filing requires appeal; if accepted but later declared invalid, with courts assigning full loss-bearing responsibility to investors, further appeals become necessary… every step fraught with difficulty.
Of course, litigating in courts hostile to crypto transactions doesn't mean passive acceptance. Parties should actively argue their case—not only considering local judicial trends but also persuading judges that peer-to-peer crypto trading should be recognized as valid. Even if the transaction is ultimately invalidated, efforts should focus on securing full restitution of invested funds. For detailed arguments supporting full repayment upon contract invalidation, see our previous article: *Can Investment Funds Be Refunded in Virtual Currency Disputes?*
One additional note: well-resourced traders may consider designating Hong Kong as the dispute resolution venue. After obtaining a favorable judgment there, enforcement can be pursued in mainland China via the mutual legal assistance arrangement between mainland and Hong Kong. This strategy leverages two realities: First, after establishing itself as a hub for trade, finance, and digital technology, Hong Kong now aims to become a global Web3.0 center, making its judiciary more open and accommodating toward crypto-related disputes. Second, the Arrangement on Mutual Recognition and Enforcement of Judgments in Civil and Commercial Matters between Mainland China and Hong Kong took effect on January 29, 2024. Thus, the “litigate in Hong Kong, enforce in mainland” model offers a clever way to safeguard traders’ contractual rights. For details on governing law and jurisdiction selection, refer to other expert articles from our firm: *What Impact Does the Implementation of Mainland-Hong Kong Judicial Assistance Have on the Web3.0 Industry?*
05 Recommendations from Manqin Law
1. Ideally, jurisdiction for cryptocurrency transactions should be explicitly agreed upon as Shanghai or Beijing. In the absence of such an agreement, actual transactions should preferably take place in these cities. Strive to anchor the dispute resolution venue in either location regardless of the method used, maximizing the likelihood that crypto-related claims will receive judicial support. Alternatively, parties may designate Hong Kong as the jurisdiction, leveraging the “Hong Kong ruling, mainland enforcement” mechanism to mitigate litigation risks and best protect their interests.
2. If jurisdiction cannot be controlled, be aware of the risks: courts may refuse to hear the case or declare the transaction invalid. In such situations, consider reframing the crypto dispute as a conventional civil or commercial debt dispute. If the transaction involved criminal acts disguised as crypto trading—such as fraud, theft, or robbery—consider filing a criminal complaint to seek restitution.
3. Given the challenges of case acceptance, the high likelihood of transaction invalidation, and uncertainty around restitution upon invalidation, parties must proactively determine jurisdiction before entering any crypto transaction and promptly seek professional legal assistance upon dispute emergence. Only by combining knowledge of local judicial trends with vigorous advocacy can parties effectively defend their legitimate rights and interests.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
