Does operating a virtual currency exchange constitute the crime of opening a casino?

In the context of blockchain technology, virtual currencies are increasingly being used as payment and settlement channels for online gambling and other black and gray industries due to their decentralization and anonymity. Recently, a friend asked me about a virtual currency exchange that was investigated by the police for running a casino.

In the process of operating a virtual currency exchange, what are the criminal risks related to the crime of opening a casino? This article discusses this.

0 1Provide payment settlement services for gambling websites

The most common situation in which virtual currency exchanges are suspected of running a casino is to provide financial payment and settlement services for gambling websites.

I have introduced the concept of "money laundering by running points". Online gambling criminals look for part-time runners to buy and sell virtual currency, and then the runners withdraw the money to the wallet address of the running point platform . The "running points" behavior of the runners providing payment settlement for the upstream casino opening crime will involve accomplices in the crime of opening a casino.

Similarly, if the exchange itself is aware that the cooperating platform is a gambling website and still provides trading services to it, objectively making the exchange a payment and settlement channel for the gambling website, according to the provisions of the "Opinions on Several Issues Concerning the Application of Laws in Handling Cyber ​​Gambling Crime Cases" (hereinafter referred to as the Opinions), the exchange is suspected of committing a joint crime with its upstream online gambling platform. At present, virtual currency exchanges are competitively motivated, and the business or sales staff of some small virtual currency exchanges may lower their cooperation standards with customers in order to increase performance, thereby laying mines for their own companies.

02The exchange launched perpetual contract business

This article focuses on another situation: a virtual currency exchange operates a virtual currency perpetual contract business.

Perpetual contracts are relative to delivery contracts with a delivery period (such as spot contracts and futures contracts). Perpetual contracts do not set a delivery date and have no deadline limit. Investors use their own principal as margin and use the leverage provided by the exchange, which can be as high as 100 times, to obtain the possibility of future profits. The higher the leverage, the greater the possible gains or risks for investors.

Exchanges mainly earn income by charging transaction fees. The practice of setting high leverage in perpetual contracts will cause investors to face great risks, while exchanges can obtain higher transaction fee income.

There is some controversy as to whether a virtual currency exchange's operation of virtual currency perpetual contract business constitutes the crime of opening a casino.

One view is that perpetual contract business constitutes the crime of opening a casino. The reason is that investors buy and sell virtual currencies, which is the same as gambling crimes in which people bet big or small to determine whether they win or lose, which is of the same nature.

According to Article 1 of the "Opinion", the following circumstances constitute the act of "opening a casino": "establishing a gambling website and accepting bets; establishing a gambling website and providing it to others to organize gambling..."

Another view is that perpetual contract business does not constitute the crime of opening a casino. The reason is that virtual currency, as a citizen's virtual property, is protected by law, and perpetual contract trading is essentially a type of financial derivative trading, which does not violate legal provisions; in addition, unlike gambling, which relies purely on luck, the price fluctuation of virtual currency is not determined by the luck of the investor himself, but by the market. Therefore, contract trading is not a "gambling" behavior, and accordingly, virtual currency exchanges operating such businesses cannot be defined as "opening a casino."

Lawyer Shao believes that speculation (the act of gaining incidental benefits at the expense of others) is a common feature of gambling, futures , and contract businesses, and cannot be used as a criterion for whether a gambling crime is constituted.

To determine whether the behavior of a virtual currency exchange constitutes the crime of opening a casino, the following factors need to be considered:

First, whether the platform can realize the real-time matching bidding mechanism among users. If the platform itself manipulates the market and there is a conflict of interest with users, it will increase the investment risk of users.

Secondly, whether the risk control measures of the platform are perfect. Is the KYC system strict, whether there is a transaction threshold, and whether there is a corresponding risk fuse mechanism. If the platform blindly sets high leverage, increasing the risks and returns of users, it will stimulate more investors with gambler mentality, disrupt the market, and produce chain reactions that are difficult to predict.

Again, whether there is any behavior such as hiring water armies, deceiving others' trust, and inducing users to participate in transactions.

Finally, is there any behavior of manipulating backend transaction data to help the platform make profits?

Therefore, if a virtual currency exchange has the above four characteristics, it may involve the crime of opening a casino.

0 3 Conclusion

It is recommended that the platform set up a complete and reasonable risk control system, conduct KYC checks on users and sources of funds, conduct regular security tests on the website, always pay attention to unfavorable public opinion and trends, and do a good job in maintaining stability for users, etc., in order to reduce possible criminal risks.