OTC behavior, buying and selling virtual currencies to earn price differences may constitute a crime

Source: Xiao Sa lawyer

On December 27, 2023, the Supreme People's Procuratorate and the State Administration of Foreign Exchange issued The "Notice on Issuing Typical Cases of Punishing Foreign Exchange-related Violations and Crimes" (hereinafter referred to as the "Notice") was issued, pointing out that it is necessary to strengthen the connection between executions and crack down on illegal cross-border financial activities in accordance with the law. It is worth mentioning that among this batch of typical cases, the first two cases mentioned virtual currencies, and both involved illegal trading of foreign exchange. Therefore, many friends in the currency circle came to consult on issues related to the OTC behavior of virtual currencies. . Today’s article by Sister Sa’s team will briefly analyze these two cases to solve the confusion of old friends.

01 Case Analysis: Qualitative Behavior of Foreign Exchange Trading Using Virtual Currency as a Medium

In Zhao In the illegal business case of others, the criminal gang first collected dirham cash in Dubai, United Arab Emirates, and at the same time transferred the corresponding RMB to the domestic RMB account designated by the other party, and then used the dirham to purchase USDT locally, and then transferred the purchased USDT Through immediate illegal sales by domestic gangs, the RMB is re-obtained, thereby forming a circulation of domestic and foreign funds, and relying on the exchange rate difference to obtain profits.

In this regard, the "Notice" clearly states that "the act of using virtual currency as a medium to exchange RMB and foreign exchange constitutes an illegal business crime." In this case, the perpetrator mainly realized the value conversion of foreign exchange and RMB through the exchange path of "foreign exchange-virtual currency-RMB". This kind of behavior is of course a kind of disguised buying and selling of foreign exchange, and is therefore suspected of illegal business crimes.

However, it should be pointed out that although virtual currency is involved here, in fact, virtual currency is just a tool to achieve the purpose of buying and selling foreign exchange. The actor can completely replace the virtual currency with other items with exchange value. Currency participates in the exchange. For example, the actor can use liquor as a medium to form a "foreign exchange - liquor - RMB" exchange path to realize the value conversion of foreign exchange and RMB. The reason why virtual currency was chosen is simply because of its concealment and its ability to easily circumvent regulation.

Therefore, although this case involves virtual currency, it is actually similar to previous disguised foreign exchange cases, except that the special subject matter of virtual currency is used.

02 Case analysis: Knowing that others are illegally buying and selling foreign exchange, and providing virtual currency as a medium to help qualitative behavior

In the case of Guo Mouzhao and others illegally operating and assisting information network criminal activities, Chen Mouzhao (handled in a separate case), Guo Mouzhao and others set up a website to provide customers with foreign currency and RMB exchange services using the virtual currency TEDA as a medium. After placing an order for foreign exchange customers, they need to pay foreign currency to the overseas account specified on the website. The criminal gang uses the foreign currency to purchase USDT, and then Fan sells it through illegal channels to obtain RMB, and finally pays it to the customer, earning profits from it. Among them, many actors provided virtual currency trading platform accounts and domestic bank accounts to Fan for accepting virtual currencies and exchanging RMB. In the end, the court determined that Guo Zhao, Fan and others committed the crime of illegal business operations, and the perpetrators who only provided accounts constituted the crime of supporting trust.

In this regard, the "Notice" pointed out that "anyone who knowingly knows that others are illegally buying and selling foreign exchange and uses the exchange of virtual currencies as a medium to provide assistance is an accomplice in the crime of illegal business operations." This case is related to the illegal business operations of Zhao and others. The cases are similar, both use virtual currency as a medium to participate in the exchange of foreign exchange and RMB, thereby achieving the effect of buying and selling foreign exchange in disguise. Therefore, there is no difference between the two as far as this part is concerned.

It is worth noting that in this case, some actors provided virtual currency trading platform accounts and domestic bank accounts. This behavior is obviously an act of assistance to illegal foreign exchange transactions, and according to the "About Handling The provisions of the "Opinions on Several Issues concerning the Application of Law in Criminal Cases such as Telecommunications Network Fraud (2)" belong to the assisting behavior in the crime of assisting information network criminal activities.

As for what kind of crime it ultimately constitutes, it depends on the subjective level of the perpetrator’s knowledge. If the actor knows that others are illegally buying and selling foreign exchange and still provides it, then the relevant behavior should constitute an accomplice to the crime of illegal business operations; if the actor only has a general understanding of the criminal behavior he is helping and does not specifically recognize the crime of helping illegal trading of foreign exchange, then the relevant behavior is only It constitutes the crime of assisting information network criminal activities; if the perpetrator does not even realize that the behavior he is helping is a crime, then the related behavior may not be suspected of crime.

In this case, since the relevant evidence can only prove that the perpetrator only has a general understanding of the criminal behavior he is assisting, the crime of assisting information network criminal activities can only be constituted.

03 Further discussion: Qualification of individual OTC behavior

Obviously, although the aforementioned two cases involve virtual currencies, It does not directly involve the characterization of personal virtual currency OTC behavior. For this type of OTC behavior, the possible suspected crime is still the crime of illegal business operations. Whether it is determined that this behavior is suspected of illegal business operations from the perspective of payment and settlement business, or that this behavior is suspected of illegal business operations from the perspective of illegal foreign exchange trading, a key point is that such OTC behavior should be interpreted as a business behavior.

According to the provisions for operators in Article 2, Paragraph 3 of the Anti-Unfair Competition Law, the so-called business activities should refer to the activities of engaging in the production and operation of goods or the provision of services. Therefore, there are two elements required to constitute business behavior: first, the content of the behavior is to provide goods or services; second, the purpose of the behavior is to make profits. The so-called profit-making, that is, "seeking profit", refers specifically to the entire process of making profits through business operations. For operations, it includes planning, planning, planning, planning, organization, governance, management, etc., which itself means a business behavior.

Therefore, the key to determining that OTC behavior constitutes the crime of illegal business operations is that this type of behavior must be a business behavior with the purpose of profit.

Take the illegal buying and selling of foreign exchange as an example. This profit-making purpose requires the perpetrators to make profits by buying and selling foreign exchange to earn the price difference. For example, in the illegal business crime case of Dai Mouquan (Case No.: (2017) Guangdong 01 Xingchu No. 49), the court pointed out that “the defendant Dai Mouquan converted approximately 18 million Hong Kong dollars into RMB through private transactions. It seems that he did not make a profit by exchanging Hong Kong dollars for RMB, and most of the money after the exchange was deposited in his personal account, which is consistent with his confession that the purpose of the exchange was for his own use.As the owner of the funds, the defendant Dai Mouquan is not engaged in illegal trading of foreign exchange. The operators only exchanged their own Hong Kong dollar funds into RMB through private black market transactions, rather than making profits by illegally buying and selling foreign exchange. Their behavior does not have the nature of market transactions for profit and is not business behavior. Therefore, the behavior of defendant Dai Mouquan does not constitute the crime of illegal business operations. The defendant and the defender put forward the opinion that the defendant does not constitute the crime of illegal business operations, and this court accepted it."

Obviously, most of the OTC behavior does not have such a profit-making purpose, and the perpetrators often do not rely on making profits from the price difference through virtual currency OTC, so it does not constitute an illegal business crime.

However, despite this, this does not mean that OTC activities are not illegal. On the one hand, as mentioned above, if the perpetrator knows that the other party is carrying out criminal activities when conducting OTC, he may be suspected of constituting the crime of trust or an accomplice in related crimes. On the other hand, relevant behaviors may still violate administrative regulations or other legal provisions. For example, the aforementioned behavior of buying and selling foreign exchange through virtual currency OTC, even if the perpetrator is not for profit, is still suspected of violating the "Public Security Management Punishment Law" and will therefore face corresponding consequences. administrative penalties.

04 Write it at the end

Although the criminal bottom line needs to be adhered to, the risk of breaking the law still needs to be treated with caution. Therefore, individuals Although virtual currency OTC behavior will most likely not constitute a criminal offense, it still has a greater risk of administrative violations, and related behaviors may also receive negative evaluations in civil law.