Illegal operation? USDT Criminal Involvement Analysis
Recently, while communicating with some friends in the cryptocurrency industry, we discovered that their determination of the nature of USDT is different from that of our country's criminal justice practices. In order to avoid the legal risks brought about by this trend, this article will sort out the criminal benefits and monetary nature of disrupting the financial management order, and analyze the criminal possibilities involved in engaging in USDT exchange business.
The status of foreign currency in our country's criminal law
According to some friends in the currency industry, our country's laws only protect the fiat currency value of RMB; other countries' fiat currencies have no legal significance. Based on this understanding, virtual currencies that anchor foreign currencies are naturally not likely to endanger China's financial management order. Unfortunately, this is not the case with our laws.
According to the provisions of Article 7 of the “Interpretation of the Supreme People's Court on Certain Issues Concerning the Specific Application of the Law in Trial of Cases of Counterfeiting Currency”: “'currency' referred to in this interpretation refers to renminbi and foreign currency that can circulate or be exchanged in the domestic market. The currency denomination shall be calculated in RMB, and other currencies shall be converted into RMB using the foreign exchange rate announced by the State Administration of Foreign Exchange at the time of the incident.”
It can be seen from this that when evaluating currency crimes in China, the scope of recognition of fiat currency covers foreign currencies, which creates a legal risk of stablecoins anchored to foreign currencies.
Analysis of the nature of USDT
USDT is called “Tether” in Chinese. It is a digital currency issued by Tether. Tether promises that USDT and US dollars can be exchanged 1:1; that is, every time Tether issues a USDT coin, its company account will deposit 1 US dollar as a security deposit, which has the characteristic of stable exchange.
However, it is also because of this stability that Sister Sa's team believes that the characteristic of being one-on-one linked to the US dollar makes USDT have certain fiat characteristics and financial attributes. As far as the specific circulation of USDT is concerned, USDT has been used as a settlement currency by many foreign virtual currency exchanges, and it has the objective effect of replacing fiat currency as a pricing standard.
In our country, individuals have a limit of 50,000 US dollars a year to exchange foreign exchange, but individuals can bypass foreign exchange controls by exchanging USDT at overseas exchanges, which may infringe on the financial management order.
Overall, USDT is a virtual currency that is issued by an unofficial entity, has the nature of fiat currency, and can circulate as an alternative to fiat currency.
Criminal legal risks of USDT exchange business
Based on the above discussion, Sister Sa's team believes that engaging in USDT exchange business in China may constitute an illegal operation crime as stipulated in section 225 of the Criminal Law of the People's Republic of China.
Items 3 and 4 of this provision stipulate: “Whoever violates national regulations and disrupts market order is serious shall be punished with fixed-term imprisonment of not more than five years, and a fine of not less than one times five times the illegal proceeds; if the circumstances are particularly serious, the penalty shall be at least five years in prison, and a fine of not less than one to five times the illegal proceeds or forfeiture of property: (3) Anyone who illegally operates securities, futures, or insurance business without the approval of the relevant competent state department, or illegally engages in fund payment and settlement business; (4) Other serious disruptions The illegal operation of market order.”
As mentioned above, USDT has the nature of a fiat currency, and the exchange business is often linked to the fund settlement business, and the possibility of replacing fiat currency circulation is also easily covered by the above underwriting provisions. Sister Sa's team believes that the performance of the USDT exchange business is easily compatible with the illegal operations listed in the crime of illegal operation.
Furthermore, as far as “violating national regulations” is a prerequisite for the crime of illegal business, Sister Sa's team previously believed that the “national regulations” that were more likely to be applied by the investigation authorities were Document No. 94 issued in 2017. However, according to the provisions of the “Notice of the Supreme People's Court on Matters Relating to Accurate Understanding and Application of “State Provisions” in Criminal Law, acts that violate local regulations or departmental regulations cannot be deemed to be a “violation of national regulations.” Therefore, we believe this is the key to criminalizing the USDT exchange business.
However, Article 22 of the “People's Bank of China Law” revision draft published on October 23, 2020 broke this criminal idea: “No entity or individual may produce or sell tokens or digital tokens to replace the circulation of RMB in the market.” Combined with the fact that the “People's Bank of China Law” was promulgated by the Standing Committee of the National People's Congress, its level of effectiveness has reached the standard of “national regulations” in criminal law. The USDT exchange business is an act of aiding the sale of tokens and has the potential to replace the circulation of fiat money. It is no longer a problem for practitioners who operate in this way to “violate national regulations” on the precondition that they are guilty of illegal business.
Write at the end
The criminal risks of the USDT exchange business are becoming more and more obvious, and the criminal path for illegal operations is becoming narrower. In situations where there are few basic criminal disputes, how can practitioners protect themselves is the most important thing. Sister Sa's team suggested acting with caution and seeking professional help in a timely manner to keep financiers from being imprisoned.
Source: Lawyer Shaw
