Brazilian Superior Court of Justice Upholds Validity of Cryptocurrency Payments in Contracts Between Private Parties

Brazilian Superior Court of Justice Upholds Validity of Cryptocurrency Payments in Contracts Between Private Parties

On August 18, the Third Panel of the Brazilian Superior Court of Justice (STJ) upheld the validity of a contractual clause providing for the transfer of cryptocurrency as consideration for the acquisition of assets in transactions entered into between private parties. In the judgment of Special Appeal No. 2,235,558/SC, the Panel unanimously upheld the decision of the Santa Catarina Court of Justice (TJSC) that the transfer of cryptocurrencies is lawful and that the mere depreciation of the asset does not invalidate the underlying transaction. Justice Nancy Andrighi, the reporting Justice, emphasized that cryptocurrencies may be used to acquire assets, but do not constitute legal tender.

The case concerned two transactions entered into between the plaintiff and the defendants, under which the defendants undertook to make payments to the plaintiff. Under the first transaction, concerning the assignment of rights over an apartment, the agreed consideration was BRL 850,000, of which BRL 450,000 was to be paid through the transfer of I9coin and the remaining BRL 400,000 in four installments of BRL 100,000. Under the second transaction, concerning the purchase and sale of a vehicle, the defendants were required to pay BRL 120,000 in I9coin, in addition to BRL 60,000 in cash.

Subsequently, the plaintiff brought an action for contractual rescission, alleging non-performance by the defendants and asserting the invalidity of the payments made in the cryptoasset “Token I9COIN.” According to the plaintiff, I9coin had allegedly been used in a pyramid scheme involving the artificial inflation of the asset’s value, rendering the payment clause unlawful. With respect to the agreement for the assignment of rights over the property, she sought rescission of the agreement, payment of the contractual penalty, and the establishment of an occupancy fee. As regards the vehicle purchase and sale agreement, she sought a declaration that the clause providing for payment in cryptoassets was null and void.

At first instance, the claims were dismissed. On appeal, however, the TJSC partially modified the judgment: it found that the defendants had defaulted under the agreement concerning the apartment, under which approximately 53% of the purchase price had been paid, and ordered the agreement to be rescinded. With respect to the vehicle, the court upheld the validity of the cryptocurrency payment clause. The court found that the plaintiff had been aware that she would receive I9coin and had failed to prove the alleged fraud or defect in consent. It also held that the risks associated with the payment method could have been investigated by the plaintiff beforehand. Before the STJ, the dispute focused on the validity of using cryptocurrencies to discharge contractual obligations and the effects of the alleged depreciation of the asset.

In addressing the issue, Justice Nancy Andrighi observed that there is no statutory prohibition on transactions involving cryptocurrencies. Article 3 of Law No. 14,478/2022 defines a virtual asset as a digital representation of value that can be traded or transferred electronically and used for payments or investment purposes. The decision explains that a cryptoasset is a type of virtual asset based on cryptography and that cryptocurrency, in turn, is a type of cryptoasset that performs the functions of a means of payment.

The STJ nevertheless emphasized that the possibility of using cryptocurrencies in private contracts does not confer upon them the status of legal tender. In Brazil, the real is the currency having mandatory legal tender status, meaning that its acceptance is compulsory for the payment of debts. Because cryptocurrencies do not have legal tender status, they do not fall within this category. Accordingly, although they may validly be used to acquire assets, they do not constitute legal tender or a “debt in money” for purposes of Article 315 of the Brazilian Civil Code. This does not, however, prevent the parties from contractually agreeing to the transfer of a particular cryptocurrency as a means of performing an obligation. In such cases, the cryptocurrency is treated as a digital asset rather than as legal tender.

Based on this distinction, the STJ concluded that private parties may agree to use cryptocurrencies for the acquisition of assets. Because acceptance of cryptocurrencies is voluntary, the risks arising from fluctuations in their value are assumed by the parties. According to the reporting Justice, the use of cryptocurrencies entails significant risks for both the purchaser and the transferor of the asset, and mere fluctuations in its value do not invalidate the underlying transaction.

Finally, the STJ found that the plaintiff had been aware that she would receive I9coin and had failed to substantiate the alleged fraud. Accordingly, the potential depreciation of the asset was not deemed sufficient to invalidate the contractual clause. Altering the TJSC’s findings regarding the lawfulness of the transfer and the absence of fraud would have required a reassessment of the evidence and an interpretation of contractual provisions, which is barred on special appeal by STJ Precedents Nos. 7 and 5, respectively. With respect to the agreement concerning the apartment, the rescission ordered by the TJSC required the parties to be restored to the status quo ante, including the return of the cryptocurrency to the purchasers.

The decision can be accessed via the following link: Legal Decision

Note: For quick release, this English version is provided by automated translation without human review.