In recent years, illegal and criminal activities in online gambling, centered in Southeast Asia, have become increasingly rampant. Due to its decentralized nature and the ability to easily evade supervision, virtual currencies are used by many online gambling platforms as a channel for the entry and exit of gambling funds. In the past few days, I have heard from friends in the industry that a contract exchange has been investigated by the public security organs for the crime of opening a casino. So, do cryptocurrency exchanges face criminal risks of opening a casino? The author will analyze it through this article.
1. The definition of gambling
When it comes to opening a casino, first let’s figure out what gambling is. In Western society, there is an economic definition of gambling. Gambling refers to betting money or something of material value on an event with an uncertain outcome, with the primary purpose of winning more money or material value. In layman's terms, gambling is a game of luck, in which participants gain spiritual pleasure through the game of money and property.
Professor Zhang Mingkai believes that gambling refers to the act of gambling or gambling with property based on accidental winning or losing. To determine whether a behavior is gambling requires the contingency of winning or losing and the use of funds and property as bets.
2. What businesses of the exchange may involve the crime of opening a casino?
Gambling behavior in our country may involve the crime of gambling and the crime of opening a casino in Article 303 of the Criminal Law. So what behaviors will be considered as opening a casino, and which businesses of the cryptocurrency platform may involve the crime of opening a casino?
The Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security issued the "Opinions on Several Issues Concerning the Application of Law in Handling Online Gambling Criminal Cases" issued in 2010, hereinafter referred to as the "Opinions". Article 1 defines the following four situations as "opening a casino":
1. Establishing a gambling website and accepting bets;
2. Establishing a gambling website and providing it to others to organize gambling;
3. Serve as an agent for gambling websites and accept bets;
4. Participate in the profit sharing of gambling websites.
Based on the above analysis, for some trading platforms that operate binary options under the banner of virtual currency derivatives trading, their business model is a typical gambling business disguised as option derivatives.
The essence of binary options is that platform users use virtual currency as a bet to buy up or down, and only the up or down direction determines the profit or loss of their bets, with the contingency of winning or losing. This model is essentially the same as traditional gambling behavior in betting on the size and winning or losing.
In addition, there are products on the exchange that use virtual currency as a bet to guess whether the last digit of the transaction hash on the chain is an odd or even number. If you guess the wrong direction, the bet will be returned to the platform, and there is also a criminal risk involved in opening a casino.
So does a cryptocurrency trading platform that does not carry out binary options not be involved in the criminal risk of opening a casino? the answer is negative.
Article 2 of the "Opinions" provides specific provisions on the circumstances under which online casinos constitute a joint crime.
Anyone who knowingly provides the following services or assistance to a gambling website shall be a joint crime of opening a casino and shall be punished in accordance with the provisions of paragraph 2 of Article 303 of the Criminal Law:
(1) Provide Internet access, server hosting, network storage space, communication transmission channels, advertising, membership development, software development, technical support and other services for gambling websites, and charge a service fee of more than 20,000 yuan;
(2) Providing fund payment and settlement services for gambling websites, collecting service fees of more than 10,000 yuan, or helping to collect gambling funds of more than 200,000 yuan;
(3) Placing advertisements related to website addresses, odds and other information for more than 10 gambling websites or placing more than 100 advertisements for gambling websites in total.
According to the above regulations, it can be seen that if a cryptocurrency trading platform knows that its partner is a gambling website and provides it with OTC services for fund payment and settlement or flash exchange services, and users of the gambling website use the cryptocurrency trading platform as a payment channel for betting in and out, The trading platform may still constitute a joint crime with the crime of opening a casino.
In addition, if the listing of cryptocurrency trading platforms involves some public chain gambling projects, providing advertising services such as market promotion or product access technical support services will also lead to the criminal risk of opening a casino.
3. Criminal compliance recommendations for cryptocurrency trading platforms
It can be seen from the above discussion that virtual currency has provided great help to illegal and criminal activities such as online gambling due to its anonymity and liquidity. For cryptocurrency trading platforms, billions of virtual currencies are transferred in and out every day. In order to reduce criminal risks, platforms should perform compliance review obligations.
Strictly review the identities of institutional partners, and conduct KYT early warning reviews on the sources of virtual currencies in cooperation channels to avoid the inflow of online gambling funds.
The currency listing business should also do a good job in project back-up, avoid listing some public chain gambling projects, and attract traffic to gambling projects.