Web3 Legal Popularization丨What legal issues do cryptocurrency OTC merchants face?

Written by Zhang Chengjun

On February 2, 2024, Hong Kong Secretary for Financial Services and the Treasury Secretary Hui Ching-yu stated that the government believes that it is necessary to put virtual currency over-the-counter exchanges (OTC) will be included in the supervision and will launch a consultation on the proposed regulatory framework in the short term. We hope that citizens and stakeholders will actively express their opinions.

As soon as this news came out at the beginning of the year, there was quite a shock in the industry. However, it seems that it can’t bring any waves to the old currency dealers in China, and they still play the role of porters in the currency circle cautiously. At the same time, many currency enthusiasts have read some introductions to the industry. After reading it, some friends will ask me, OTC seems to be very simple. I buy and sell, and I make a profit. Is it stable? ! Every time I see someone who feels like they have mastered the code of wealth, I have to, as a legal practitioner, say to him sincerely: "Friend, if the code of wealth is so easy to get, there won't be so many people still looking for it. ”.

Old coin dealers may also have to say, do you know how I have lived these years? I'm not trying to dampen your interest in learning about web3.0. But please don’t think of it too simply.

What is virtual currency OTC?

In fact, to understand this problem, we must first understand what is OTC?

OTC (over the counter) literally means over-the-counter trading, so this "field" actually refers to the virtual currency trading platform. On-exchange and off-exchange are based on whether it is through a trading platform. OTC can also be divided into two forms accordingly:

First, online point-to-point trading (C2C), this method still requires digital A currency trading platform is formed, published and communicated on the trading platform, but the transaction is not formed through the trading platform. Instead, after the buyer and seller confirm the transaction, the buyer transfers money to the seller through Alipay, WeChat, bank card transfer, etc.;

二, the traditional way, that is, after being introduced by someone, the traditional buying and selling model, individuals privately agree on the buying and selling method and then trade freely, not through the platform.

After we understand what OTC is, new friends will feel that it is more profitable, and it is an old school model. Is this still web3.0 as I thought? Isn't this just "the bad guy"? Then I have to say, my friend, you really hit the point. The historical period that gave rise to the phenomenon of "traitors" was the early stage of my country's reform and opening up. The market economy was imperfect and the demand for goods could not be met.

Common legal risks for OTC merchants

Back to the topic, in terms of the current domestic actual situation in the currency circle, although virtual digital currency transactions have not been classified as illegal by law, virtual digital currency transactions Due to the currency's high anonymity, high investment risk, strong secrecy, and cross-border flow, OTC transactions are often easily exploited by criminals and become a means of money laundering, evading foreign exchange controls, and illegal transactions. This forces us to pay attention to the legal risks involved.

This is also the reason why the Hong Kong government wants to legislate industry rules. It looks tighter but is actually smoother. An industry without healthy rules of the game is like a highway without guardrails. It is very easy to run out of the correct route, causing the car to crash and people to die.

Although virtual currency OTC will usher in an era of compliance in Hong Kong, there is no relevant trend in mainland China. The development of virtual currency transactions in mainland China is still full of problems such as "illegal operations", "facilitation", "MLM marketing by organizational leaders", "concealment" and so on.

This is also the reason why the risk is high. It is impossible to just do it. If your uncle comes to provide services, this will not be good. Of course, if we just want to be an OTC merchant honestly. I think it's not a big problem.

Through communication with currency merchants, he pointed out that "the crime of trust" is or has become the number one challenge for currency merchants. Today I will start by talking about the issue of "help letters".

Article 1 of the 2017 "Announcement on Preventing Financing Risks of Token Issuance" stipulates that "tokens" or "virtual currencies" are not issued by monetary authorities and do not have monetary attributes such as legality and compulsory nature. It does not have the same legal status as currency and cannot and should not be used as currency in the market. "According to this, in our country, virtual currency has no monetary attributes and no payment and settlement capabilities. At the same time, the announcement stated that the prohibited businesses are limited to ICO (initial coin offering) and exchanges are prohibited from engaging in exchange and information intermediary businesses. In other words, as an OTC merchant, the buying and selling of virtual currencies between natural persons is not an illegal activity under the relevant laws.

Why do OTC merchants commit "crimes" by "helping people"?

Let’s first understand the crime of “helping information network criminal activities”. When we see the full name of this crime, the word help is extremely conspicuous. Therefore, OTC merchants have become suspects in the crime of helping information. It’s not because we are currency dealers, but because we “help” information network criminal activities.

At this time, many OTC merchants are about to complain, and I have not helped! I don’t know anything! Our method of help has one and only one act, which is "collecting money"! This is a problem that plagues all OTC merchants. How to receive clean money. I also asked a veteran in the industry this question, and he gave me a serious but unusual answer: "Collect cash." Indeed, collecting cash can physically cut off the possibility of cybercrime, but what about bulk or on-site currency dealers? They only do offline business or a very small part of the business. Then we must do a good job of KYC, and every customer and every transaction must be fully reviewed. But this may still not completely isolate the connection with this crime.

In the interpretation of key and difficult issues in the "Interpretation on Several Issues Concerning the Application of Laws in Criminal Cases such as Illegal Utilization of Information Networks and Assistance to Information Network Criminal Activities", the standards for the incrimination of this crime are clarified:

First, considering the scope of assistance provided, standards are set for the number of objects to be helped. The second is to consider the act of providing payment and settlement assistance and set standards for payment and settlement amounts. The third is to consider providing assistance such as advertising, and stipulate standards for the amount of funds provided through advertising and other methods. Fourth, considering the perpetrator’s illegal income, the amount standard of illegal income is stipulated. The fifth is to consider the subjective malignancy of the perpetrator, stipulating the situation where within two years, the person has received administrative punishment for illegally using information networks, assisting information network criminal activities, endangering the security of computer information systems, and also assisting information network criminal activities. Sixth, consider the circumstances in which the person being helped commit criminal activities, and stipulate the circumstances in which the crime committed by the person being helped causes serious consequences. Not only that, because the elements of the crime specify that the suspect must know that his behavior is to assist the crime, it also clarifies seven "knowingly" situations for the "crime of aid and trust":

First, being informed by the regulatory authorities Those who still carry out the relevant behavior after the crime is committed, that is, the cyberspace, telecommunications, public security and other regulatory authorities inform the perpetrator that others use the technical support or assistance provided by them to commit crimes, but continue to provide technical support or assistance. Considering the actual supervision and enforcement situation, the "notification" here is not limited to written form.

The second is failure to perform statutory management duties after receiving a report, that is, the perpetrator receives a report, knows that others are using the technical support provided by him or to help commit crimes, and fails to perform in accordance with the Cybersecurity Law and other laws and regulations to stop providing services , stop transmission, delete and other disposal obligations.

Third, the transaction price or method is obviously abnormal, that is, the actor's transaction price obviously deviates from the market price, and the transaction method is obviously inconsistent with market rules.

The fourth is to provide programs, tools or other technical support and assistance specifically for illegal crimes, that is, the programs, tools or support and assistance provided by the perpetrator are not required for normal production and life and network services, but only It is a specialized service that provides assistance for illegal and criminal activities, such as building "phishing websites" and making special Trojan horse programs.

Fifth, those who frequently use covert Internet access, encrypted communications, destroy data and other measures or use false identities to evade supervision or evade investigation.

Six is ​​providing technical support and assistance to others to evade supervision or avoid investigation.

Seventh are other circumstances that are sufficient to determine that the perpetrator knew the crime.

My suggestion is that friends who are doing OTC should check their own behavior based on the above situation. For example, a customer comes to you through the venue and asks for a large deposit, and the money can be transferred immediately. Can this situation be considered as an obvious abnormality in the transaction price and method?

Coin dealers should beware of "illegal business crimes"

The above is the detailed content of Web3 Legal Popularization丨What legal issues do cryptocurrency OTC merchants face?. For more information, please follow other related articles on the PHP Chinese website!