Source: Lawyer Jin Jianzhi
From the "Notice of the National Development and Reform Commission and other departments on rectifying virtual currency "mining" activities" (Fagaiyun [2021] No. 1283) ("924 Since the issuance of "Notice"), domestic mining has become virtually impossible.
In this case, is overseas investment in mining farms a perfect alternative? Will investing in mines overseas suffer unforeseen disasters like the 924 Notice? Attorney Mankiw is here to talk to you about this article.
The steps involved in overseas investment in mines are mainly domestic/foreign procurement of mining machines, selection of suitable addresses, and overseas production and operation.
01 Is it possible to purchase mining machines domestically?
A mining machine is a machine used to run mining programs to earn virtual currency.
Before the 924 notice, the purchase and sale of mining machines was essentially an ordinary sales contract. However, after the 924 Notice, because mining was characterized as "large energy consumption and carbon emissions, low contribution to the national economy, limited promotion of industrial development, technological progress, etc., in addition, the risks derived from the production and transaction of virtual currency have become increasingly Projects whose blind and disorderly development has a negative impact on promoting high-quality economic and social development and energy conservation and emission reduction are highlighted. The validity of the mining machine sales contract is easily considered invalid by the court because it harms social and public interests. After invalidation, the equipment payment and equipment will be returned to each other by both parties.
A typical example is the sales contract dispute case of Hu Xingrui v. Wang Gang, which was released by the Second Civil Court of the Supreme Court as one of the top ten commercial cases in national courts in 2022. Judging from the consequences of the court's judgment, for the party buying the mining machine, the risk of the mining machine sales contract being deemed invalid mainly lies in:
Significant capital losses. The buyer has paid but the seller has not shipped the goods, resulting in a large amount of funds being occupied and the loss of funds cannot be claimed.
If there is a quality problem with the mining machine itself, it is impossible to request continued performance or damages through litigation. Since the invalid contract is invalid from the beginning, even if the seller delivers the mining machine, if there is a quality problem with the mining machine but the seller does not solve it, even taking it to court will be of no avail.
Anticipated BenefitsLosses. In a bull market, if the currency price continues to rise, but the seller breaches the contract and fails to deliver the goods as agreed, resulting in the buyer's originally expected mining income being lost, it will be difficult for the court to support this expected loss of profits.
In addition to civil risks, considering the 924 Notice and referring to the current practice of domestic e-commerce platforms and second-hand trading platforms that have completely removed and blocked mining machines and other similar products, < strong>In extreme cases, it is not ruled out that purchasing mining machines in China may be deemed an administrative violation by law enforcement agencies and subject to administrative penalties.
02 Is there any risk when mining machines go overseas?
The "Foreign Trade Law", "Export Control Law", "Data Security Law" and other relevant laws and regulations have formulated requirements and regulations that prohibit or restrict the export of exported goods, technologies and services. .
Specifically when it comes to mining machines, export companies should consider in advance the existing "Catalog of Prohibited Export Goods", "Catalog of Export License Management Goods" and "China Prohibited Goods" from the two dimensions of "physical objects" and "contained data". Export Restricted Export Technology Catalog" and the "Dual-use Items and Technology Import and Export License Management Catalog" and other applicable export control catalogs and lists, judge carefully whether the mining machine and its components to be exported are prohibited from export by the country or Relevant export license procedures need to be handled in advance. If the mining machine to be exported is second-hand equipment, the relevant information stored within it needs to be evaluated, inspected and made necessary disposal from the perspective of data security in accordance with the law. Otherwise, mining machine export companies may face administrative penalties, and if they constitute a crime, they may also be held criminally responsible.
For second-hand old mining machines, when exporting, they should also avoid being recognized as "solid waste" by the importing country, which will face the risk of being required to return or be disposed of on site.
In addition, the transaction price of goods in international trade has always been the focus of customs supervision in various countries. In the process of shipping mining machines overseas, if you cooperate with overseas import companies to modify key customs declaration documents such as mining machine sales contracts or invoice prices, you may face foreign criminal risks such as smuggling.
03 Can domestic companies directly mine overseas?
The "Foreign Trade Law", "Export Control Law", "Data Security Law" and other relevant laws and regulations have formulated requirements and regulations that prohibit or restrict the export of exported goods, technologies and services. .
Specifically when it comes to mining machines, export companies should consider in advance the existing "Catalog of Prohibited Export Goods", "Catalog of Export License Management Goods" and "China Prohibited Goods" from the two dimensions of "physical objects" and "contained data". Export Restricted Export Technology Catalog" and the "Dual-use Items and Technology Import and Export License Management Catalog" and other applicable export control catalogs and lists, judge carefully whether the mining machine and its components to be exported are prohibited from export by the country or Relevant export license procedures need to be handled in advance. If the mining machine to be exported is second-hand equipment, the relevant information stored within it needs to be evaluated, inspected and made necessary disposal from the perspective of data security in accordance with the law. Otherwise, mining machine export companies may face administrative penalties, and if they constitute a crime, they may also be held criminally responsible.
For second-hand old mining machines, when exporting, they should also avoid being recognized as "solid waste" by the importing country, which will face the risk of being required to return or be disposed of on site.
In addition, the transaction price of goods in international trade has always been the focus of customs supervision in various countries. In the process of shipping mining machines overseas, if you cooperate with overseas import companies to modify key customs declaration documents such as mining machine sales contracts or invoice prices, you may face foreign criminal risks such as smuggling.
04 It is not easy to operate mining overseas
The moon abroad is not necessarily round. Foreign mining laws, regulations and policies may not be consistent or stable, and complete due diligence needs to be conducted in advance.
Many countries, such as Canada, Australia, Iran, Ukraine and some state governments in the United States, have passed regulations to legalize virtual currency mining, but they usually require permission from the competent authorities, which is the so-called "license". Mining”. If you mine without a license, or if you mine in violation of the electricity and energy conditions stipulated in the license, you will also face investigation or punishment by the country's regulatory authorities.
According to Tasmin News Agency, in January 2021, the Iranian authorities seized 1,620 cryptocurrency “mines” and seized 45,000 Bitcoin “mining machines” because these “mines” were During the "mining" process, subsidized electricity (that is, electricity that enjoys financial subsidies) from the state-owned energy supplier Tavanir was used illegally. According to news from Tencent on April 16, 2022, the Iranian government will pass new regulations to increase penalties for using subsidized electricity for illegal cryptocurrency mining. According to the new regulations, the increased penalties include at least tripling the fines. Up to five times, the offenders will be imprisoned and the business license will be revoked in the case of repeated violations; and according to Reuters, in June 2021, Iranian police seized and confiscated 7,000 cryptocurrency units in an abandoned factory in the capital Tehran. Mining Machines” on the grounds of illegal “mining”without a license.
In addition to the risks of mining, due to energy supply shortages, some national governments may control virtual currency mining activities through temporary bans. For example, the Iranian government issued a Bitcoin mining ban on December 28, 2021, ordering the closure of authorized Bitcoin mining centers to avoid a power shortage crisis. This ban will last until March 6, 2022. Therefore, those who invest in overseas minesshould first consult the relevant regulations on mining activities in the country where they are located. Otherwise, they may face high fines or the risk of mining machines being confiscated due to violation of legal regulations or temporary bans.
For some countries that are subject to international sanctions or foreign exchange controls (recognizing the legalization of Bitcoin),it may be necessary to sell the cryptocurrency obtained by "mining" in the country or remit foreign exchange. Comply with relevant laws and regulations, otherwise you may face legal risks such as account freezing, and may even be accused of illegal activities such as foreign exchange evasion, illegal transactions, money laundering, etc., and thus face criminal liability.
05 Mankiw King’s lawyer suggested
When signing a mining machine sales contract in China, attention should be paid to the seller's ability to perform. If governed by domestic law, the validity of the mining machine sales contract may easily be deemed invalid by the court on the grounds that it harms social and public interests.
Mining machines cannot be exported at will. It is necessary to carefully judge whether the mining machine and its components to be exported are prohibited from export by the country or need to go through relevant export license procedures in advance; if it involves internal storage of information , requires data compliance.
Foreign mining laws, regulations and policies may not be consistent or stable, and complete due diligence needs to be conducted in advance.
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