In the rapidly evolving world of digital assets, cryptocurrency transactions have become increasingly common — yet they remain legally complex and fraught with risk. From informal loans in USDT to high-stakes investment mandates, many disputes arise not from malicious intent, but from the absence of clear contractual agreements. Despite regulatory uncertainty and the potential for contracts involving virtual currencies to be deemed invalid under Chinese law, a well-drafted contract still plays a critical role in protecting your rights.
This guide explores how written agreements can clarify transaction intent, establish legal accountability, and support dispute resolution — even when courts ultimately rule the contract unenforceable.
Do Courts Consider Cryptocurrency Contracts?
Even if a contract is later declared invalid due to regulatory restrictions, courts often examine its contents to determine the nature of the transaction. Two recent cases illustrate this principle:
In (2024) Hu0117 Min Chu No. 5661, Plaintiff Peng transferred 1,000,000 RMB worth of funds at the encouragement of Defendant Zhu to invest in virtual currency. After significant losses, both parties signed a formal Agreement in December 2021, acknowledging the sum as a loan and outlining repayment methods, timelines, interest, and fallback options.
Despite the underlying investment involving cryptocurrency — which may conflict with financial regulations — the court recognized the existence of a valid lending relationship based on the written agreement. This allowed Plaintiff Peng to recover damages effectively.
👉 Discover how structured agreements protect digital asset transactions
In contrast, (2024) Lu03 Min Zhong No. 781 highlights the risks of not having a contract. Plaintiff Zhao sued Defendant Wang over a disputed crypto-based wealth management arrangement. With no written agreement, the court had to rely solely on fragmented evidence like chat logs and transfer records. The lack of clarity led to doubts about whether any enforceable agreement existed at all.
These rulings show that a written contract serves as powerful evidence during litigation, helping courts identify the true nature of the transaction — whether it's a loan, purchase, or委托 investment.
Can an Invalid Contract Still Be Useful?
Yes — and here’s why.
Even when a contract is invalidated for violating financial regulations or public policy (e.g., “damaging social public interests”), it can still serve a vital function: clarifying the economic reality between parties.
In (2023) Gan01 Min Zhong No. 8416, Plaintiff Ma sued over a fund transfer he claimed was a loan. The defendant argued it was actually a委托 investment in crypto assets. However, without a written contract, only chat screenshots supported his claim — insufficient for the court to accept.
The lesson? Without documentation, the legal characterization of a transaction becomes highly subjective, leading to prolonged disputes and higher litigation costs.
A real-world case handled by legal practitioners involved a plaintiff who entrusted the defendant to buy cryptocurrency. The defendant denied any委托 relationship, calling it mere informal assistance. The case cycled through first trial, appeal, and retrial — all centered on one question: What kind of transaction actually occurred?
Had there been a simple written contract stating the nature of their arrangement, much of this legal turmoil could have been avoided.
While Chinese courts frequently invalidate crypto-related contracts under principles of public order and good customs (e.g., (2024) Shen0115 Min Chu No. 45503), they often still recognize the property value of virtual assets and require restitution. For instance, a borrower may be ordered to return equivalent cryptocurrency or compensate in fiat currency — precisely because the contract helped prove the original transaction intent.
Why Define Responsibility in Writing?
Ambiguity in duty and liability is another major source of conflict.
In (2023) Qian0103 Min Chu No. 769, the plaintiff transferred money to the defendant for purchasing crypto. The委托 contract was invalidated, but the court focused on allocating fault.
Since no written agreement existed:
- The plaintiff, being in blockchain education, was presumed aware of risks.
- The defendant promoted the investment, guided operations, and promised capital protection — breaching fiduciary duties.
Result? Both parties were held equally liable, sharing losses 50/50.
But dissatisfaction followed:
- The plaintiff argued their technical knowledge didn’t equate to crypto expertise.
- The defendant claimed they were only helping informally and received no benefit.
👉 Learn how clear terms prevent liability disputes in digital finance
Without a contract defining roles, expectations, and obligations, fault allocation becomes arbitrary. A proper agreement should specify:
- Whether the委托 includes risk disclosure and prudent management
- Whether the委托人 bears market risk or expects guaranteed returns
- How funds are handled (e.g., segregation of assets)
- What constitutes breach or negligence
Such details give judges objective criteria for fair judgments.
Essential Clauses for a Cryptocurrency Transaction Contract
To maximize protection despite regulatory uncertainty, include these key provisions:
1. Accurate Identity Information
Require full names, ID numbers, contact details, and wallet addresses. This verifies authenticity and supports traceability in legal or criminal investigations.
2. Clear Transaction Description
Explicitly state the type of transaction:
- If it’s a loan: specify amount (in fiat or stablecoin), purpose, repayment schedule, interest rate (if any), and preferred repayment method (preferably traceable like bank transfer).
- If it’s a 委托 investment: define scope (e.g., BTC only), duration, profit-sharing model, and risk acknowledgment.
- Recommend using fiat currency valuations due to crypto’s volatility.
3. Liability for Breach
Outline consequences of non-performance:
- Late fees or default interest
- Compensation for direct losses
- Legal cost reimbursement
This strengthens enforcement even if the contract is partially invalid.
4. Contingency Plans
Include fallback mechanisms:
- Installment repayment options
- Third-party guarantees
- Alternative settlement methods (e.g., compensation in RMB if crypto cannot be returned)
These reduce execution risk and demonstrate good faith.
Frequently Asked Questions (FAQs)
Q: Is a cryptocurrency contract legally binding in China?
A: Most contracts involving crypto trading or financing are likely to be deemed invalid due to regulatory prohibitions. However, invalidity doesn’t erase all legal effects — courts still use contracts to determine transaction nature and allocate responsibility.
Q: Can I enforce repayment if the contract is invalid?
A: Yes. Courts may order restitution based on unjust enrichment principles. If someone received your funds or assets without legal basis, they may be required to return them or pay equivalent compensation.
Q: What if we only have chat messages instead of a formal contract?
A: Texts can serve as evidence but are weaker than written contracts. They’re often incomplete, ambiguous, or easily disputed. Always formalize important agreements in writing.
Q: Should I use cryptocurrency or fiat in repayment clauses?
A: Use fiat currency (e.g., RMB) whenever possible. Crypto’s price volatility makes enforcement difficult and increases dispute risks.
Q: Does signing a contract protect me from criminal liability?
A: Not entirely — illegal activities (e.g., money laundering) aren't shielded by contracts. But a legitimate agreement with clear intent can help distinguish lawful private transactions from illicit conduct during investigations.
Q: Can I create a contract myself?
A: Simple templates work for basic deals, but complex arrangements (e.g.,委托 investing large sums) should involve legal professionals to ensure clarity and compliance.
Final Thoughts: Don’t Underestimate the Power of Paper
👉 Secure your next digital transaction with proactive planning
While China maintains strict controls over cryptocurrency activities, private transactions still occur — and disputes inevitably follow. In this high-risk environment, a well-drafted contract isn’t about guaranteeing validity; it’s about preserving truth.
It clarifies intentions, documents responsibilities, reduces ambiguity, and provides crucial evidence when things go wrong. Even if declared invalid, such a document can anchor judicial reasoning and lead to fairer outcomes.
So before sending that next USDT transfer or entrusting funds to a friend, ask yourself: Am I willing to bet my money on trust alone?
The answer should guide your next step — drafting a clear, comprehensive agreement that protects what matters most.