Are domestic OTC operations illegal?

Introduction

Currently, many case handling units are discussing:For OTC merchants make money from the price difference by buying and selling the stablecoin USDT. Can these currency exchanges be charged with an "illegal business crime"? On December 16, the Guangdong Provincial Higher People's Court published an article "This kind of price difference cannot be earned!" ” gave his own answer: Buying and selling USDT to earn the price difference is a disguised form of foreign exchange trading. If the circumstances are serious, he will be convicted and punished for the crime of illegal business operations.

The judgment of the Dabu County Court was considered by the Guangdong Provincial High Court to be of typical significance. Most people will also think that "OTC merchants" reselling USDT to make a profit, it is a business after all, and it can be regarded as a business activity. But, I have to say: the "crime of illegal business operations" stipulated in our country's "Criminal Law" has strict conditions. It does not mean that as long as you do business without a business license, it is a crime of illegal business operations. Therefore,Whether it can constitute the crime of illegal business operation still depends on the provisions of the law.

1. Why did the court consider the behavior of buying and selling USDT to make a difference Is it considered an illegal business crime?

According to an article published by the official public account of the Guangdong Provincial High Court,Chen was tried in the Dapu County Court of Meizhou City, Guangdong Province for illegal In the business case, the defendant Chen purchased TEDA coins from unspecified retail investors through a virtual currency trading platform, and hired a bodyguard named Li to escort the cash he purchased. Afterwards, he used his mobile phone to make a transaction appointment with Huang (who was not present at the case). 814,000, which is equivalent to more than 5.1 million yuan based on the exchange rate between RMB and U.S. dollars on that day. The Dabu County Court held in the first instance: Chen and Li’s behavior of exchanging foreign currency and RMB through buying and selling virtual currencies is a disguised form of buying and selling foreign exchange, and the circumstances are serious, constituting the crime of illegal business operations. . After the verdict of the case was announced, since both of them expressed their acceptance of the verdict and did not file an appeal, the above-mentioned first-instance judgment came into effect after the expiration of the appeal period.

The Guangdong Provincial High Court held that:Tether is a virtual currency pegged to the U.S. dollar. Its price is relatively stable and can be anonymously traded. Global circulation, however, Tether's high liquidity, anonymity, and difficulty in supervision have attracted a large amount of criminal capital, and the buying and selling of Tether is extremely harmful to society. Therefore, this case is of typical significance for cases in the new field of combating virtual currencies. Judge Luo, who handled the case, said in an interview: “Tether is the intermediate currency of foreign virtual currency trading platforms. It is a token of the stable value currency US dollar... A large amount of money is exchanged through Tether. The act of converting RMB into U.S. dollars will inevitably reduce the country’s foreign exchange reserves, affect the country’s macro-management of foreign exchange, destroy the only legal status of RMB in the domestic market, and also greatly interfere with the effectiveness of foreign exchange management and the stability of the legal exchange rate. Disturbing the normal order of the financial market is a disguised form of buying and selling foreign exchange and should be punished.”

Liu Lei’s legal team disagrees with the above view: As a statutory crime, the crime of illegal business operations has strict conditions for conviction, requiring that there must be violations of the prerequisite law. In the above case, Chen’s behavior of buying and selling USDT to make a profit, does it fall under the prerequisite law? A prescribed violation? Can USDT be legally interpreted as foreign exchange? There are great controversies. The court identified the defendant's behavior as an illegal business crime before clarifying these issues, and even publicized the judgment as a typical case. We think there is something inappropriate.

2. Purchasing and selling USDT to earn the price difference constitutes the premise of the crime of illegal business operations

From the perspective of legal provisions, several situations that constitute the crime of illegal business operations in Article 225 of the Criminal Law include:

(1) Operating laws without permission , specializing in, monopolizing items or other restricted items as prescribed by administrative regulations;

(2) Buying and selling import and export licenses, import and export certificates of origin, and other items Business licenses or approval documents stipulated in laws and administrative regulations;

(3) Illegal operations of securities, futures, and insurance businesses without the approval of the relevant national competent authorities , or illegally engage in fund payment and settlement business;

(4) Other illegal business activities that seriously disrupt market order.

Judging from the nature of virtual currency, it obviously does not belong to the exclusive or exclusive items stipulated in laws and administrative regulations, or items that are explicitly restricted from buying and selling, nor does it belong to the legal , business license or approval documents stipulated in administrative regulations. Therefore, high-frequency buying and selling of virtual currencies to earn price differences (also known as "currency merchants", "OTC merchants", "U merchants", and "arbitrage to earn price differences" in the industry) obviously does not fall under Article 225 of the Criminal Law The circumstances specified in paragraphs 1 and 2. Then, we will focus on the last few paragraphs of this law:

First, according to the third paragraph of Article 225 of the "Criminal Law", The model of OTC merchants buying and selling coins needs to be interpreted as "fund payment settlement". But in fact, the business model of OTC merchants is more similar to scalper intermediaries. It is different from the traditional third-party and fourth-party payment models that form a precipitation pool, especially for off-site and offline transactions.

Second, according to the fourth paragraph of Article 225 of the "Criminal Law", the model of OTC merchants buying and selling coins needs to be interpreted as "seriously disrupting the market economy" orderly behavior. However, according to the Supreme People’s Court’s “Notice on Relevant Issues Concerning the Accurate Understanding and Application of “State Provisions” in Criminal Law” (Fafa No. 2011/155): “Whether the defendant’s behavior falls within Article 220 of the Criminal Law "Other illegal business activities that seriously disrupt market order" as stipulated in Article 5 (4), if the relevant judicial interpretations do not clearly provide for it, should be regarded as a matter of legal application, and the Supreme People's Court should be sought for instructions step by step." Therefore, if it is to be The behavior of OTC merchants buying and selling virtual currencies applies Article 225, Paragraph 4 of the "Criminal Law" to apply the crime of illegal business, which requires our grassroots courts to seek instructions from the Supreme People's Court level by level.

Third, in addition to the clear explanation of the crime of illegal business operations in Article 225 of the Criminal Law, there is also a judicial interpretation that can classify OTC merchants who buy and sell virtual currencies. The behavior was interpreted as illegal business crime. This legal article is: Article 3 of the "Interpretation on Several Issues Concerning the Application of Laws in Criminal Cases of Illegal Engagement in Fund Payment and Settlement Business and Illegal Purchase and Sale of Foreign Exchange", which clarifies: Illegal engagement in fund payment and settlement business or illegal purchase and sale of foreign exchange, If the business amount exceeds 5 million yuan; the circumstances are serious and constitute the crime of illegal business operations.

3. OTC merchants buy and sell the stable currency USDT. Can thisstable currency be legally interpreted as foreign exchange?

Through the discussion in the first paragraph, we know that the behavior of OTC merchants buying and selling virtual currencies does not belong to "fund payment settlement". In addition, in In the absence of a judicial interpretation that clarifies the connotation and denotation of the blanket expression "seriously disrupting the order of the market economy," it is not appropriate to directly include the above-mentioned behaviors within its scope of regulation. Then, if the behavior of OTC merchants is to be determined as an illegal business crime, a relatively reasonable argument can only be: virtual currency belongs to foreign exchange, so the behavior of buying and selling virtual currency may constitute an illegal business crime of "illegal foreign exchange purchase and sale".

However, the question is: OTC merchants buy and sell the stable currency USDT. Can this stable currency USDT be legally interpreted as foreign exchange?

According to the literal meaning: Foreign exchange should be the legal currency issued by the sovereign country; and USDT is the private enterprise Tether Company The launch of tokens based on the stable value currency US dollar (USD) should be included in the explanation of foreign exchange. Moreover, regarding the qualitative issue of virtual currency, there are currently many disputes in the legal community: Can virtual currency be directly recognized as foreign exchange? Or should it be considered a virtual product? There are two main different views on this: one view is that only the legal currency issued by the central government of an overseas country or region can be called foreign exchange, and virtual currency is just a virtual commodity; the other view is that , virtual currency can be regarded as foreign exchange, because the foreign exchange stipulated in the "Foreign Exchange Management Regulations" not only includes the legal currency of sovereign countries, but also includes non-monetary payment certificates, securities, withdrawal rights, etc. Due to the large controversy, in actual case handling, it is basically not seen that the case handling department directly interprets stable currency as foreign exchange.

According to the provisions of Article 3 of the "Foreign Exchange Management Regulations": the foreign exchange referred to in these Regulations refers to the following foreign currencies that can be used as international Means of payment and assets for repayment:

(1) Foreign currency cash, including banknotes and coins;

;">(2) Foreign currency payment certificates or payment instruments, including bills, bank deposit certificates, bank cards, etc.;

(3) Foreign currency securities, including Bonds, stocks, etc.;

(4) Special Drawing Rights;

(5) Other foreign exchange assets.

We believe:First of all, virtual currency does not belong to "foreign currency". The "foreign currency" in the "Foreign Exchange Administration Regulations" should only refer to legal currencies produced and uniformly issued by the governments of other sovereign countries, such as US dollars, euros, Japanese yen, etc. As a medium of exchange, legal currency mainly relies on the credit of the country and the general acceptance of a country's public, while virtual currency is not officially issued by other sovereign countries and does not have the credit support of the country. Its issuer, as a market organization for the survival of the fittest, has not yet It has enough credibility to enable the whole society to recognize and accept the virtual currency it issues. In fact, virtual currency is usually only recognized and circulated within a specific trading circle. Although it develops rapidly within a certain range, its circulation area is still very narrow compared to the entire national economy, and it is impossible to "generally circulate" internationally. ". Therefore, virtual currencies are not considered “foreign currencies”.

Secondly, virtual currency does not belong to the non-monetary form of "payment means and assets used for international settlements." Payment vouchers such as securities, bills, bank cards, etc. can mainly be used as a measure of the value of goods or services in the economy and society to save transaction costs. Although the value of virtual currency can be measured to some extent within its trading circle, its own value is mainly affected by the issuer and still needs to be judged based on legal currency. Assume that a commodity is worth 10 USDT. At a certain point in time, the market demand for the commodity is 100 units, and only this commodity is circulating in the market. If the exchange ratio of RMB to USDT at this time is 1:1, then the market will The demand for this product is 1,000 yuan. If the issuer issues 1,000 USDT for free, since people still measure the commodity based on RMB, the value of USDT will decrease significantly due to the increase in issuance. It can be seen that ifvirtual currency is used as a means of payment, it can only exist as an intermediate conversion unit based on RMB. People cannot directly use virtual currency to price goods or services without leaving the real currency in reality. Therefore, virtual currencies such as USDT cannot be used as a general payment method, let alone for international payments.

According to the purpose of explanation: Whether it is the strict control of foreign exchange in the "Foreign Exchange Management Regulations" or the "Criminal Law" that will achieve The illegal purchase and sale of foreign exchange of a certain amount is defined as a crime. Its core purpose is not only to strengthen the management of overseas circulation and transactions of RMB, but also to maintain the normal order of the international circulation of RMB property and foreign exchange property in the context of economic globalization. , thereby protecting the stable value and trading status of the RMB in the international market. As mentioned above, virtual currency is still essentially a virtual commodity. Although its circulation scope has gradually expanded in recent years, it still does not have the same functions and status as legal currency and will basically not be able to have the same function and status as legal currency in the future. The virtual currency transactions engaged in by OTC merchants only affect the value of the virtual currency itself to a large extent. Compared with the "illegal foreign exchange trading" behavior of directly exchanging RMB with foreign currencies privately, its impact on the value of RMB can be said to be It's minuscule. Therefore, there is no need for us to elevate a simple virtual commodity buying and selling behavior to the level of "illegal foreign exchange trading" that disrupts the market economic order. However, if the OTC merchant knows for sure that the purpose of the merchant's purchase of the stable currency USDT is to exchange for foreign exchange, it is also That is to say, the stable currency USDT is used as a bridge for currency exchange. The OTC merchant's buying and selling of the stable currency USDT is an act of helping people to exchange currency. If the amount reaches 5 million, it can be considered an illegal business crime.

4. The lawyer has something to say

The above is about whether "OTC merchants who buy and sell USDT to earn price differences" constitute illegal business crimes. Discussion, it is obvious thatin the above case released by the Guangdong High Court, Chen’s behavior of buying and selling USDT to earn price differences should not be directly identified as an illegal business crime.

As for the judgment in this case, lawyer Liu Lei believes:Criminal law should uphold the spirit of modesty, and the provisions of relevant laws and regulations are not clear yet Under such circumstances, we should be guided by the spirit of benefiting the defendant, implement the principle of legal punishment and adopt relatively strict standards for conviction, so as not to infringe on the legitimate rights and interests of citizens or even hinder the healthy development of the market economy.