Several major pitfalls in cryptocurrency withdrawal!
Before starting, a simple popularization: USDT merchants can operate and it is not illegal, but if the following conditions are touched, they may be targeted by authorities.
Common seven situations:
🔸 Not trading on mainstream exchanges and frequently trading off-exchange.
🔸 Contacting through encrypted software to evade regulation.
🔸 The selling price is significantly different from the market price.
🔸 Using someone else's bank card or continuing to trade with a frozen bank card.
🔸 No capital investment, buying and selling according to upstream instructions.
🔸 Frequent trading of USDT leads to large bank transaction volumes.
🔸 Establishing a virtual currency studio, frequently engaging in arbitrage, but the fixed trading counterpart is involved in money laundering, which could lead to complications, etc.
From the perspective of profit models, there are the following patterns:
🔹 Placing buy and sell orders separately within the same exchange;
🔹 Placing buy and sell orders separately between different exchanges;
🔹 Posting buy and sell information for private transactions in chat software and online communities;
🔹 Trading through online or acquaintances' introductions and other offline transactions.
Some domestic users can become certified merchants on the platform by paying a margin of 10,000 USDT, which is over 70,000 RMB, after passing identity verification, video verification, and binding their phone and email information.
Then, on the C2C buy coin page, you can see many merchants placing orders. When you click in, you can see orders to sell at 7.26 and buy at 7.22. For one USDT, you profit 4 cents, which means for 10,000 USDT, you earn 400 RMB.
Moreover, during the same time period, there are many similar OTC merchants placing orders. The buy and sell prices are determined by the merchants themselves, and the model of USDT merchants is low-profit and high-sales. Large OTC merchants can have transaction volumes exceeding billions annually, while smaller merchants may also have transaction volumes of several million. The more the transaction volume, the greater the profit. However, the accompanying risk also increases.
1️⃣ Is making a profit by buying and selling USDT on OKX and BN illegal?
First, the answer: USDT merchants can operate.
After all, our country does not prohibit the trading of fiat currency and virtual currency between individuals.
After all, with just a click of the mouse, simple actions of buying and selling can yield tens of thousands or even more in profit each month.
Related legal interpretation:
On September 24, 2021, ten ministries, including the People's Bank of China, jointly issued the notice (on further preventing and handling risks of virtual currency trading speculation (Yin Fa [2021] No. 237)) (hereinafter referred to as the '924 Notice'), reminding citizens to prevent financial risks brought by virtual currencies. However, simple virtual currency trading behavior does not violate relevant provisions of our current laws and administrative regulations.
Among them, frequent buying and selling of USDT OTC may belong to illegal financial activities, but does not directly constitute a criminal offense.
Therefore, laws and regulations do not prohibit virtual currency trading; where there is no prohibition, there is freedom. The notice from 2021 serves as a normative document and does not prohibit virtual currency trading. In summary, virtual currency trading is not illegal in the country.
2️⃣ How can one legally and compliantly make money by arbitrage?
To make money legally and compliantly, one must avoid the principle of [subjective knowledge].
Whether there is a review in the process of trading virtual currencies is crucial. According to Article 11 of the judicial interpretation of the 'assisting crime', judicial authorities determine that the defendant subjectively knew, but if the defendant presents contrary evidence, it is excluded. In other words, once the defendant presents contrary evidence proving ignorance, it may not meet the subjective constitutive requirements of 'assisting crime'.
Common seven situations for identifying 'assisting crime' with subjective knowledge:
🔸 Not trading on mainstream exchanges and frequently trading off-exchange.
🔸 Contacting through encrypted software to evade regulation.
🔸 The selling price is significantly different from the market price.
🔸 Using someone else's bank card or continuing to trade with a frozen bank card.
🔸 No capital investment, buying and selling according to upstream instructions.
🔸 Frequent trading of USDT leads to large bank transaction volumes.
🔸 Establishing a virtual currency studio, frequently engaging in arbitrage, but the fixed trading counterpart is involved in money laundering, which could lead to complications, etc.
'Concealing crime' is stipulated in Article 312 of the Criminal Law, which clearly states that knowing it is criminal proceeds and transferring it.
It is because the transaction received illegal funds and the behavior does not conform to transaction rules, which is deemed an abnormal transaction, thus presuming subjective knowledge. Originally normal transactions became non-compliant, so to make money legally and compliantly, one must avoid the principle of [subjective knowledge].
The laws and regulations clearly outline the presumption rules of 'knowledge'. Specifically for virtual currency trading, it should be based on trading methods, trading prices, whether the bank card has been frozen, and other abnormal behaviors to determine whether there is subjective knowledge regarding the funds being illegal.
🌕 Below, I will clarify how to determine whether there is [subjective knowledge] through court judgment perspectives:
Whether it's 'assisting crime' or 'concealing crime', both require the actor to subjectively know. If the actor does not subjectively know, it does not constitute a crime. Moreover, according to the principle of presumption of innocence, if there is doubt regarding the elements of the constitutive requirements, and if the fact is crucial for determining the defendant's innocence, a favorable judgment should generally be made for the defendant.
However, it is important to note that there are presumption rules for 'assisting crime' and 'concealing crime'. One of the presumption rules is that if the actor's bank card has been frozen, it may directly presume subjective knowledge.
🔹 Related case 1: Chen Mou assisting information network crime, criminal judgment of assisting information network crime, Criminal Judgment No. (2023) Ji 8601 Criminal Initial 41:
Basic case facts: In early 2022, the defendant Chen Mou began buying and selling USDT virtual currency (Tether) on the 'OKX platform' to earn the price difference. During this time, several bank accounts under Chen's name were frozen by the public security authorities. Between March and April 2022, Chen registered accounts on the 'OKX platform' and linked his accounts from Zhejiang Deqing Rural Commercial Bank (card number 6230xxxxxxxxxx) and Zheshang Bank (card number 6223xxxxxxxxxx), facilitating payment settlements for information network crime by buying and selling 'Tether'. It was found that over 375,000 RMB defrauded from multiple telecom fraud victims was transferred into the above bank accounts through Huang Mouqing's account.
The court believes: The defendant Chen Mou knew that others were using information networks to commit crimes, yet still provided his bank card for payment settlement assistance, which is serious. His behavior constitutes assisting information network crime, and the prosecution's accusations are established.
🔹 Related case 2: The criminal ruling of Peng Mouqiang for concealing and hiding criminal proceeds, Hebei Province Cangzhou City Intermediate People's Court, Criminal Ruling.
(2023) Ji 09 Criminal Final 450.
Basic case facts: After trial, it was found that from June 2021 to June 11, 2022, defendant Peng Mouqiang conspired with others to invest in establishing a studio and organized a team to use overseas 'OKX' trading platforms to engage in virtual currency trading that is explicitly prohibited by the state. He collaborated with Lin Mouyu, Wu Moufan, and others to privately sell virtual currency, using multiple bank cards for transactions. The public security authorities have repeatedly frozen these transactions, and while knowing that the transaction funds might be illegal, he still engaged in virtual currency exchanges, assisting others in laundering illegal proceeds. A total of 34 bank accounts were frozen 60 times, with a total frozen amount of 3,262,663.61 RMB.
The court believes: The appellant (original defendant) Peng Mouqiang invested in virtual currency trading that is explicitly prohibited by the state, established a studio, organized a team to engage in virtual currency trading activities using overseas trading platforms for a long time, and used multiple bank cards for transactions. The public security authorities have repeatedly frozen these transactions, and while knowing that the transaction funds might be illicit, he still engaged in virtual currency exchanges, assisting others in laundering illegal proceeds. A total of 34 bank accounts were frozen 60 times, with a total frozen amount of 3,262,663.61 RMB, and 159,000 RMB of fraud funds were identified. His actions constituted the crime of concealing and hiding criminal proceeds, and the situation was serious.
🌕 Other comprehensive identifications:
In trading the virtual currency USDT, the profit margin is mostly between 1-3 cents per USDT. Additionally, if there are other abnormal behaviors during the transaction, it may be presumed that the individual is aware.
Related Case 1: The criminal judgment of Zhong Moufeng for assisting information network crime, Hunan Province Ningxiang City People's Court, Criminal Judgment No. (2022) Xiang 0182 Criminal Initial 252.
Basic case facts: In November 2021, the defendant Zhong Moufeng used the 'Telegram' chat software to trade USDT virtual currency with his superior 'Baggio' (handled in another case). Both parties agreed to trade USDT virtual currency, with 'Baggio' requiring Zhong Moufeng to purchase USDT virtual currency on platforms like 'OKX' in advance and then acquire it at a price higher than the platform purchase price, with direct bank transfers between both parties.
The court believes: The defense's opinion that the defendant Zhong Moufeng does not constitute the crime of assisting information network crime is not accepted. Evidence such as the defendant's statements in court, WeChat chat records, and bank transaction records confirm that the defendant Zhong Moufeng knew that virtual currency-related business activities were illegal financial activities. The timing, trading prices, and guaranteed profit forms of his transactions differ from normal transactions. Despite the fact that his bank card was frozen multiple times during the operation, he still used his account for transfer transactions according to his superior's instructions, allowing the results to occur. His behavior meets the constitutive requirements of the crime of assisting information network crime, so this defense opinion is not adopted.
🌕 How to operate as a compliant and legal USDT merchant?
Whether there is a review in the process of trading virtual currencies is crucial. According to Article 11 of the judicial interpretation of the 'assisting crime', judicial authorities determine that the defendant subjectively knew, but if the defendant presents contrary evidence, it is excluded. In other words, once the defendant presents contrary evidence proving ignorance, it may not meet the subjective constitutive requirements of 'assisting crime'.
Currently, the review of virtual currency mainly includes reviewing the buyer's bank transaction records, reviewing the buyer's real-name information, requiring the buyer to record a video, inquiring about the purpose of the buyer's purchase of USDT, and other substantive reviews.
🔹 Clearly knowing (or having strong reasons to believe) that the trading counterpart is engaged in illegal activities, one must decisively refuse;
🔹 Conduct KYC verification properly with trading counterparts, such as identity verification, reviewing bank/Alipay/WeChat transaction records, and ensuring that this transaction is not used for illegal activities (text + video);
🔹 The acceptance rate should ideally align with market rates and should not differ too much (based on general market conditions and trading practices, such as each transaction should not profit or lose more than 0.5%);
🔹 Keep good chat records with trading counterparts, and it is not recommended to use overseas encrypted chat software or self-destructing chat software.
🔹 You must develop the habit of taking screenshots and recording evidence every month to prevent last-minute scrambles.
🔹 When receiving USDT, avoid receiving black USDT, which refers to USDT from illegal sources.
🔹 Finally, avoid using USDT as a medium to indirectly conduct exchanges between foreign currency and RMB, as this behavior may be recognized by judicial authorities as disguised foreign exchange transactions, which could involve illegal business operations.
🔹 When selling coins, ensure proper review. If someone who is not in the crypto circle comes to buy USDT with purposes outside of investment, be cautious to avoid getting involved in criminal cases.
Operating as a USDT merchant can easily violate crimes such as assisting crime, concealing crime, illegal business operation, fraud, etc. Remind everyone to pay attention to details and not to lose big because of small mistakes.
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