Punished for circumventing the firewall to trade in cryptocurrencies - You may have misread this case

 Author: Zeng Jie; Source: Financial Crime Defense Diary

Introduction:

This ordinary administrative penalty case has caused two major misunderstandings. The first misunderstanding is that many people mistakenly believe that it is the "first case" in which the domestic public security organs formally define that citizens' trading of virtual currency is illegal; the second misunderstanding is that the definition of illegal income in this case exceeds the scope of the Administrative Penalty Law, and the 90,000 yuan income from cryptocurrency trading should not be confiscated.

Main text:

According to media reports, a local public security organ in China has punished a team that used a VPN software to speculate in cryptocurrencies for arbitrage. Specifically, Zhang San's team was engaged in virtual currency arbitrage business and used VPN software on a daily basis. Therefore, the local public security organ punished them for violating my country's "Interim Provisions on the Management of International Networking of Computer Information Networks". The punishment included confiscation of relevant Internet access tools, a fine of 15,000 yuan, and confiscation of illegal income (profit from cryptocurrency speculation and arbitrage) of 90,000 yuan.

The focus of the problem is whether the 90,000 yuan profit is illegal income from circumventing the firewall to access the Internet?

Note that the focus of the problem is what kind of illegal income this 90,000 yuan is, not whether cryptocurrency speculation is illegal. However, lawyer Zeng noted that many people believe that this is the first case in which domestic public security organs have determined that cryptocurrency speculation is illegal, and use this as a "sensational" policy vane, which is a big fallacy.

Of course, this case involves analysis at multiple legal levels.

1. Analysis of the nature of cryptocurrency speculation and arbitrage business

The virtual currency arbitrage business engaged in by Zhang San's team is essentially an activity that uses the price difference between different trading platforms to make a profit. The nature of this behavior, according to current policies, is to prohibit related exchanges from operating in China, but not to prohibit individual citizens from holding and trading.Therefore, Zhang San's team was punished, and it is impossible that it was because of the virtual currency trading arbitrage (arbitrage) behavior, so the basis for punishment does not exist. The reason why Zhang San was punished was that he used illegal wall-climbing software to access the international Internet.

2. Behavioral analysis of using circumvention software

Violation of laws and regulations: In my country, without the approval of the telecommunications regulatory authorities, one is not allowed to establish or lease dedicated lines (including virtual private networks VPN) or other channels to carry out cross-border business activities. According to Article 6 of the Interim Provisions on the Administration of International Networking of Computer Information Networks, "Computer information networks that directly connect to the Internet must use the international entry and exit channels provided by the national public telecommunications network. No unit or individual may establish or use other channels for international networking." And Article 14, "Any person who violates the provisions of Articles 6, 8 and 10 of these Regulations shall be ordered by the public security organ to stop connecting to the Internet, given a warning, and may be fined up to RMB 15,000; if there is any illegal income, the illegal income shall be confiscated."

3. Is this administrative penalty case undisputed?

For this case, there is no dispute that Zhang San was punished for administratively violating the law to access the Internet, but the focus of the issue is whether the 90,000 yuan confiscated from him is illegal income from "climbing the wall to access the Internet"?

In terms of nature, this income is actually not directly related to circumventing the firewall to access the Internet.

Unlike criminal penalties, this type of public security violation is a matter that is directly determined and punished by the public security organs, while the penalty decision for criminal cases is based on the judgment of the people's court. Therefore, the concept of illegal income in this case must strictly refer to the provisions of the Administrative Penalty Law, Article 28 of which stipulates that "illegal income refers to the money obtained from the implementation of illegal acts."

Zhang San's team illegally connected to the international Internet, which is an illegal act. Their illegal income is directly caused by this illegal act. For example, Zhang San will receive a related time reward for using an illegal VPN. This reward is illegal income obtained by implementing illegal acts. The two are directly related. In this case, the 90,000 yuan profit from Zhang San's team's cryptocurrency trading was the result of their arbitrage of virtual currency transactions, not the result of their unauthorized use of illegal channels for international networking (climbing over the firewall). There is no direct connection between the behavior of climbing over the firewall and their cryptocurrency trading profit, unless Zhang San's team received a 90,000 yuan reward for climbing over the firewall itself, in which case the two are directly related.

If the income without direct connection is counted as illegal income, it means that all income obtained through the software for climbing over the firewall belongs to the sequence that can be directly confiscated by the public security organs. For example, Li Si uses the software for climbing over the firewall to sell his legal real estate abroad, and the income from stock speculation and investment abroad can all be confiscated, which obviously exceeds the scope of legal principles and common sense.

Fourth, One case, two misunderstandings

This ordinary administrative penalty case has caused two major misunderstandings. The first misunderstanding is that many people mistakenly believe that it is the "first case" in which the domestic public security organs formally define citizens' trading of virtual currency as illegal. This is obviously too excited and leads to confusion; the second misunderstanding is that the definition of illegal income in this case exceeds the scope of the Administrative Penalty Law, and 90,000 yuan should not be confiscated.