What kind of model of virtual currency transaction involves the crime of illegal operation?
Recently, friends in the virtual currency industry sent private messages from home and abroad asking: In China, which virtual currency trading models are treated as illegal business crimes? Sister Sa gave a brief reply on this question. Please be sure to pay attention to the red line of the law and not test the law by yourself.
There aren't many legal models, but there are.
From the perspective of existing laws and regulations and judicial practice, the legal characterization of Bitcoin as a “specific virtual product” has not changed. Sister Sa believes that the Civil Code also allows Chinese people to hold bitcoins. This is a prerequisite for virtual currency to still have room to survive in China.
Currently, there are two legal business models involving virtual currency. The first is the virtual currency wallet business, that is, maintaining the security of virtual currency, providing solutions to prevent hacker attacks, etc.; the second is OTC, which exchanges coins for coins. Since these two models are legal, it is legally acceptable to provide information brokering services or other technical services for these two models.
However, providing value-added services for wallets, such as “regular interest,” is not permitted by our country's laws. The reason is that the 9.4 announcement denied the financial attributes of virtual currency, so any financial service involving virtual currency is generally suspected of being illegal, but to a different extent.
USDT\ USDC may be recognized as a “fiat currency”
Sister Sa chatted with several prosecutors and judge friends. One consensus was that “foreign money is also fiat currency”. There is a legal basis for this; let's not go into detail. Now we are concerned about whether stablecoins such as USDT are actually cryptocurrencies. From an administrative law perspective in the strict sense of the term, of course, a virtual currency anchored to the US dollar cannot be treated as a fiat currency. However, from a substantive perspective, one-on-one anchoring the US dollar has liquidity and payment and settlement functions, so it is likely that USDT will be treated as a foreign currency in the field of criminal law.
Therefore, any counterfeiting business using stablecoins (in violation of the Foreign Exchange Administration Regulations) may be deemed a crime of illegal operation in violation of section 225 of the Chinese Criminal Law.
Digital currency lending issues
In July 2019, the Supreme Court, the Supreme Prosecution, the Ministry of Public Security, and the Ministry of Justice jointly issued “Opinions on Certain Issues Concerning Handling Criminal Cases of Illegal Lending”, summarizing that the act of violating national regulations, without approval from the supervisory authorities, lending funds to an unspecified number of people 10 times within 2 years, with interest exceeding 36% annualized (recent regulatory revisions, currently 15.4% annualized) is illegal usury lending and is suspected of illegal operation.
Due to differences in the legal characterization of virtual currencies such as Bitcoin, mainstream coins such as Bitcoin are “specific virtual goods”; the native token of ICO is “data.” Both have no legal status as “funds.” However, since stablecoins, etc. are directly linked to fiat currencies, and mainstream currencies such as Bitcoin also have mature markets, in practice, there is still a high probability that digital currencies will actually be viewed as “currency,” and issuing various types of virtual coins will also be treated as illegal loans. However, the various native tokens of the Caotai Team ICO will not be treated as currencies; they are likely to be treated as fraud crimes.
Write at the end
The virtual currency hedging business may involve “illegally engaging in futures business.” The quantitative business of virtual currency may be involved in fraud if it colludes with an exchange. ICO itself does not violate the crime of issuing stocks and securities without permission under our country's laws.
Source: Lawyer Shaw
