In 2024, will trading virtual currencies in mainland China violate the law? If so, what laws are violated? And if you make a profit from trading virtual currencies, will you be directly confiscated or punished? Will the public security authorities freeze your card and detain you?
This article is divided into three parts. The first part is whether it is illegal to trade virtual currency in China. The second part is whether the profits from virtual currency trading can be confiscated or punished. The third part is why virtual currency trading is not illegal, but the credit card will be frozen, and some even involve criminal offenses.
1Is it illegal to trade virtual currency?
At present, domestic supervision on virtual currency is mainly based on normative documents such as notices and announcements, and laws, regulations and rules do not provide for virtual currency transactions.
According to the "Notice on Preventing Bitcoin Risks" (hereinafter referred to as the "Notice") issued by the People's Bank of China and other departments on December 5, 2013, the nature of Bitcoin is clarified, and it is believed that Bitcoin is not issued by the monetary authority, does not have monetary attributes such as legal compensation and compulsion, and is not a real currency. However, as a commodity trading behavior on the Internet, ordinary people have the freedom to participate in Bitcoin transactions at their own risk. USDT, as a stable currency, is the anchor object for the value/price of mainstream virtual currencies such as Bitcoin, and should also be equally protected by law.
On September 4, 2017, the People's Bank of China and seven other ministries and commissions issued the "Notice on Preventing Risks in Token Issuance and Financing" (hereinafter referred to as the "94 Notice"). The "token" here refers to the "native token" issued by the issuer, and the so-called "virtual currency" refers to the "specific virtual commodities" such as Bitcoin in the central bank's notice in 2013. The scope of the prohibition of the "94 Notice" is limited to the field of illegal token issuance and financing, and does not prohibit individuals from holding, trading and buying and selling virtual currencies (including Tether USDT).
On September 24, 2021, the People's Bank of China and ten other ministries and commissions jointly issued the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Transaction Speculation (Yinfa [2021] No. 237)" (hereinafter referred to as the "924 Notice"), reminding citizens to guard against the financial risks brought by virtual currency, but the simple virtual currency trading behavior does not violate the relevant provisions of my country's current laws and administrative regulations.
Therefore, laws and regulations do not prohibit the transaction of virtual currency. If there is no prohibition, there is freedom. The above-mentioned 13-year notice, 17-year announcement, and 21-year notice are normative documents and do not prohibit the transaction of virtual currency. In short, the transaction of virtual currency is not illegal in China.
2. Profit confiscation or punishment?
According to Article 16 of the Administrative Penalty Law, except for laws, regulations and rules, other normative documents shall not establish administrative penalties. Therefore, under the current legal system in my country, normative documents such as the 2013 Notice, the 94 Announcement in 2017, and the 924 Notice in 2021 shall not establish types and measures of administrative penalties.
Therefore, law enforcement agencies cannot simply determine that virtual currency transactions are illegal based on normative documents such as the 2013 Notice, the 94 Announcement of 2017, and the "924 Notice" of 2021, and cannot impose administrative penalties or confiscate profits on those engaged in virtual currency transactions, especially those trading USDT. Otherwise, the actions punished by the law enforcement agencies will be illegal, and you can file an administrative reconsideration or administrative lawsuit against the law enforcement agencies.
3. It is not illegal, so why is the card frozen and criminal case involved?
Minor card freezing:
Trading virtual currencies itself is not an act prohibited by law. However, due to the characteristics of virtual currencies, they are deeply loved by criminals such as money launderers. That is, some money launderers will give you funds from illegal crimes such as telecom fraud and online gambling in exchange for your USDT to achieve the purpose of money laundering. If you trade virtual currencies and receive funds from illegal crimes, once the victim reports the case and the public security organs investigate, they will freeze your bank card along the flow of funds. This is the common practice in the currency circle where the funds involved are received from selling u-funds, resulting in the receiving bank card being frozen by public security organs in other places.
Severe cases may involve criminal penalties:
Many people have a misunderstanding about this, thinking that if you receive funds from online fraud when trading virtual currency, the bank card will only be frozen, and that the funds can be unfrozen by returning the fraudulent funds, and that there will be no criminal risk. In fact, this is not the case. On the basis of the bank card being frozen, if there is abnormal behavior in the way you trade virtual currency, it will involve a criminal offense.
According to Article 287, Paragraph 2 of the Criminal Law, and the judicial interpretation of the crime of aiding and abetting. It is presumed that you are subjectively aware of it, which will constitute the crime of aiding and abetting. According to Article 312 of the Criminal Law, and the judicial interpretation of the crime of concealing, it is presumed that you are subjectively aware of it, which will constitute the crime of concealing. The rule for presuming your subjective knowledge is not that you think there must be clear chat records, such as the other party saying to you, "I want to launder money, you sell me u." Instead, it is based on your abnormal behavior in the transaction, it is presumed that you subjectively know that the other party is committing information network crimes or the source of funds is telecom fraud funds:
First, it is not traded on mainstream exchanges and is often traded over the counter.
Second, circumvent supervision by communicating through encrypted software.
Third, the selling price is obviously different from the market price.
Fourth, using other people’s bank cards or continuing transactions with a frozen bank card.
Fifth, there is no capital investment, just buy and sell according to the upstream instructions.
Sixth, frequent transactions of USDT and large bank card transactions.
Seventh, set up a virtual currency studio and frequently do brick-moving business, but if the fixed counterparty is involved in money laundering, you will be implicated, etc.
Therefore, you can see many media reports that someone used USDT to launder money and was caught by the public security authorities.
In addition to the criminal risk of money laundering through telecom fraud, there are also certain legal risks if the other party is an online gambler or a currency exchanger. Some online gambling platforms now require gamblers to go to the exchange to buy USDT to top up. If you know that the other party is an online gambler and that the other party buys your USDT to gamble, and you sell it to him, even if it is a normal price, you will be guilty of illegal business operations. If you know that the other party exchanges RMB for USDT and then exchanges it for US dollars, and you provide USDT as a medium in the middle, and the other party uses USDT to exchange currency, and the amount exceeds 5 million or the profit exceeds 100,000 yuan, you will be guilty of illegal business operations.
4. Last
To sum it up in one sentence, trading virtual currencies does not violate any laws, but virtual currency trading can easily breed criminal activities such as money laundering. It does not prevent the public security organs from freezing the bank card where you received the stolen money based on the evidence provided by the victim, and cracking down on criminal activities such as aiding and concealing, money laundering, fraud, illegal fund-raising, fundraising fraud, illegal business operations, and pyramid schemes using virtual currency USDT.
Here is a reminder: If someone asks you to register a virtual currency account, or wants to take you to trade virtual currency offline, you must refuse, because the other party is laundering money. If you encounter an exchange selling u, changing stores, or changing bank cards, the other party is also laundering money and must refuse. Trading virtual currencies, especially OTC, is prone to freezing cards + criminal charges.
