Virtual currency trading is classified as illegal fundraising Several issues that practitioners must pay attention to

Recently,| the Supreme People's Court issued the Decision of the Supreme People's Court on Amending the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Criminal Cases of Illegal Fund-raising (hereinafter referred to as the "Latest Judicial Interpretation"), which will come into effect on March 1, 2022.

The latest judicial interpretation is the refinement and interpretation of the crime of illegally absorbing deposits from the public in article 176 of the Criminal Law and the crime of fund-raising fraud in article 192 of the Criminal Law, of which article 2 (8) clearly stipulates that virtual currency trading is the crime of illegally absorbing deposits from the public.

"The landing of regulatory boots is not unexpected." Pan Ting, a lawyer at Rongfu Law Firm, told the Blockchain Daily reporter that in fact, since the release of the Notice on Further Preventing and Disposing of the Speculation Risk of Virtual Currency Transactions, the judicial interpretation on virtual currency-related transactions has been expected.

After the implementation of the new judicial interpretation, what acts can be done and what cannot be done, as well as the difficulties in the implementation process, the "Blockchain Daily" reporter interviewed a number of professional lawyers.

ICOs, IEO, IGO all kinds of behavior are illegal

Pantene said that the provisions of this judicial interpretation bear the brunt of ICOs (derived from the concept of initial public offerings in the stock market, which is the initial issuance of tokens by blockchain projects to raise common digital currencies such as Bitcoin and Ethereum). Such behavior is the focus of the latest Judicial Interpretation, including various forms of ICO transformation, IEO (the use of the exchange as a fundraising platform to issue (sell) tokens to the users of the exchange), IGO (initial game distribution, is a form of crowdfunding that applies blockchain technology similar to ICO or IEO), no matter how the name changes, it is essentially an illegal act of absorbing public deposits.

Pantene further explained that before the implementation of the Latest Judicial Interpretation, the filing of ICO cases has always been a difficult problem. If the project party is raising funds in french currency, it is usually relatively simple to file a case with the public security organs. However, if the project party is raising funds with virtual currency, such as ETH, USDT, etc., then filing a case is comparable to learning from the experience, and it is difficult to go through 9981. However, after the implementation of the Latest Judicial Interpretations, it is believed that the difficulty of filing a case will gradually change.

Lawyer Pantene pointed out that Gamefi's project party should not have a fluke mentality, although the form of chain game is very novel, but the essence of iGO is still to illegally absorb public deposits.

"Then there's money management. Such as locked wealth management (saving), pledge wealth management (staking), Lunchpad, etc., are basically within the jurisdiction of the latest judicial interpretations. Pantene said.

"The new judicial interpretation of illegal fund-raising will be implemented, and the illegal absorption of funds by means of online lending, investment in shares, virtual currency trading, etc. will be used as a condition for the conviction of the crime of illegally absorbing deposits from the public, which is a new requirement for making up for the shortcomings of supervision and law, cracking down on relevant illegal and criminal acts, and is also a new summary of new judicial practices and new forms of crime." Li Ya, a partner at Zhongwen Law Firm, said in an interview with Blockchain Daily.

Lawyer Li Ya said that the behavior involving virtual currency trading, whether it is OTC trading, coin trading, DeFi, Gamefi and airdrop behavior, etc., can not only judge the legal nature of an act from the business model, it is necessary to unveil the essence of this thing.

Li Ya further explained that as long as it meets the four characteristic elements of the crime of illegally absorbing public deposits, namely illegality, openness, inducement, sociality, etc., and does not meet the applicable conditions of the enterprise compliance reform pilot, it may involve the crime of illegally absorbing public deposits.

Is the previous coin issuer safe?

It is worth noting that for the previous coin issuing project parties, whether the latest judicial interpretation has retrospective power is also a focus of attention in the coin circle.

"If the original project continues until now, then this kind of illegal or criminal act is a continuous state, which must be applicable to the new judicial interpretation." Leah said.

Li Ya explained that the retroactivity of mainland criminal law is the principle of "from the old to the light", that is, the criterion of "benefiting the defendant". Similarly, for acts that occur before the implementation of the new judicial interpretation, the relevant judicial interpretations exist at the time of the acts, and are handled in accordance with the judicial interpretations at the time of the acts; however, where the application of the new judicial interpretations is beneficial to the criminal suspect or defendant, the new judicial interpretations shall apply.

Will the NFT platform be affected?

2021 is known as the first year of NFT, and many domestic Internet companies have launched their own digital collection platforms (NFT platforms), so will the NFT platform be affected by the Latest Judicial Interpretations?

Ms. Pantene said that conventional NFT platforms and transactions are not regulated by the Latest Judicial Interpretations and the Notice on Further Preventing and Disposing of Speculation Risks in Virtual Currency Transactions.

Pantene pointed out that "conventional" NFT platforms and transactions still involve criminal offenses if the project party or platform uses the issuance of a large number of NFTs to raise funds or price manipulation of unspecified targets to disrupt financial markets.

However, Pantene also said that digital collection platforms such as Ali's Whale Detective and Tencent's Phantom Core do not have secondary market transactions, and they also use private chains, and they all use RMB, and their legal risks are very small.

The difficulty of conviction

For the difficulty of characterizing virtual currency transactions as illegal absorption of funds. Lawyer Li Ya believes that there are three main aspects:

First, the crime of virtual currency trading is often closely related to technological innovation and financial innovation, and when defining crime and non-crime, it is necessary to accurately determine the means of crime.

Secondly, virtual currency trading crimes will involve blockchain and other related technical issues, and case-handling personnel need to have a certain understanding of relevant professional knowledge.

There is also the fact that virtual currency trading crimes mostly use technical tools such as the internet and blockchain, and involve many people, which has caused many difficulties for case-handling personnel to collect evidence and fix evidence.