Research Series on Criminal Offences Involving Virtual Currency (XVIII): Virtual currency regulation is upgraded again. How do you view the "Announcement on Preventing the Risk of Virtual Currency Trading Speculation" issued by the three associations? Author: Yang Tianyi, a lawyer who specializes in the defense and research of new economic and financial crime cases, and is the Secretary-General of the Economic Crime Defense and Research Center of Guangdong Guangqiang Law Firm Recently, the state and local governments have taken a number of measures to conduct "encirclement and interception" supervision on virtual currency and "mining". On May 18, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued the "Announcement on Preventing the Risk of Virtual Currency Trading Speculation" (hereinafter referred to as the "Announcement"); on the same day, the Inner Mongolia Autonomous Region Development and Reform Commission issued the "Announcement on the Establishment of a Reporting Platform for Virtual Currency "Mining" Enterprises"; on May 21, Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Director of the Financial Committee, presided over the 51st meeting of the State Council Financial Stability and Development Committee and clearly proposed "cracking down on Bitcoin mining and trading, and resolutely preventing individual risks from being transmitted to the social field"; on May 25, the Inner Mongolia Autonomous Region Development and Reform Commission issued the "Eight Measures on Resolutely Cracking Down on and Punishing Virtual Currency "Mining" (Draft for Comments)"; on May 27, the Sichuan Supervision Office of the National Energy Administration issued a notice to hold a symposium to investigate the relevant situation of virtual currency "mining" in Sichuan. Judging from the recent regulatory measures, there is a central government-level decision to "crack down on Bitcoin mining and trading," local governments have also taken measures to crack down on "mining," and even the three major industry associations have issued self-regulatory regulations within the industry. The entire virtual currency trading market has also been constantly oscillating with the introduction of various regulatory measures. Recently, many friends have been asking me what signals the recent regulatory measures have released, and how should we interpret the "Notice on Preventing the Risk of Speculation in Virtual Currency Transactions" issued by the three associations? The author believes that the country’s attitude towards cracking down on virtual currency and “mining” essentially reflects the country’s resolute attitude towards cracking down on telecommunications fraud and money laundering crimes. Among the recent intensive regulatory measures, the most important one is the clear proposal by the Financial Stability and Development Committee of the State Council to "crack down on Bitcoin mining and trading activities". On the surface, the recent measures were introduced because of the sharp fluctuations in Bitcoin prices, which led to large-scale liquidation and losses of investors. The state has taken various measures to maintain the stability of the financial order and "prevent individual risks from being transmitted to the social field". However, combined with the "card freezing trend" in the currency circle from last year to this year and the series of measures taken by the state to continuously combat telecommunications fraud crimes, it can be seen that the state's re-escalation of virtual currency supervision is not just due to the accidental factor of the sharp fluctuations in the value of Bitcoin, but is essentially an inevitable measure for the state to continuously combat telecommunications fraud crimes and money laundering crimes. The biggest problem facing virtual currencies at present is that their decentralized nature is exploited by criminals, making virtual currencies a hotbed for criminals to evade regulation and launder money. In the past year, many innocent virtual currency investors have had their credit cards frozen or even had criminal coercive measures taken against them, which is a reflection of this problem. The local government’s crackdown on virtual currency “mining” is, on the one hand, to achieve the dual energy consumption control targets of the “14th Five-Year Plan”, and on the other hand, to curb the output of virtual currency from the source. If the tone set by the central government and its implementation at the local level is "encirclement and pursuit" at the administrative level, then the "Announcement" issued by the three associations can be regarded as the "blockade" of virtual currency by the financial and Internet industries. So, how should the three associations’ “Announcement on Preventing the Risks of Speculation in Virtual Currency Transactions” be interpreted? First, the main content of the Announcement is basically consistent with the relevant regulations issued previously. Judging from the first and second articles of the Notice, the content of the Notice is basically consistent with the relevant provisions of the Notice on Preventing Bitcoin Risks issued by the People's Bank of China, the Ministry of Industry and Information Technology, and the China Banking Regulatory Commission in December 2013, and the Notice on Preventing Token Issuance and Financing Risks issued by the People's Bank of China, the Central Cyberspace Affairs Commission, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission in September 2017, which denies the monetary attributes of virtual currencies and reiterates the illegality of conducting virtual currency exchange business in China. The slight difference is that compared with the 2013 Notice on Preventing Bitcoin Risks, the Notice of the three associations prohibits member units from conducting business, expanding from "Bitcoin" to all "virtual currencies". It can be said that the content of the "Announcement" can be regarded as a continuation and reaffirmation of the notice issued by three ministries in 2013 and the announcement issued by seven ministries in 2017, and does not impose new prohibitions on member units. Second, the Announcement is an industry regulation rather than a legal norm in nature and does not have universal binding force on the individual behavior of citizens. The Announcement is a document jointly issued by the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association. In terms of the nature of the document, it is an industry regulation issued by an industry association and a self-regulatory regulatory document within the industry, which is very different from legal regulations. The Notice on Preventing Bitcoin Risks and the Announcement on Preventing Token Issuance and Financing Risks are both issued and implemented by state ministries and commissions. They are departmental regulatory documents in terms of effectiveness. Although they are not national laws, they are also generally binding. Industry regulations are different. Industry regulations are documents issued by self-regulatory organizations such as industry associations within the industry to regulate the relevant behaviors of member units. They do not fall within the scope of national laws or departmental regulatory documents, and their effectiveness is not as good as the former two. They are not generally applicable and binding. Therefore, as a document issued by an industry association, the Announcement is binding on the association's member units, and member units that violate prohibitive provisions may be punished by the industry association. However, since the Announcement does not fall within the scope of legal norms, it does not have the effect of constraining the behavior of ordinary citizens. Third, the purpose of issuing the "Announcement" is to restrict the transaction, circulation, payment and settlement of virtual currency by strengthening the self-regulation of member units. It can be seen from the fourth article of the "Announcement" that the purpose of the "Announcement" is to strengthen the self-discipline supervision of member units, requiring member units to "strictly implement relevant national regulatory requirements, abide by industry self-discipline commitments, and resolutely not conduct or participate in any business activities related to virtual currency", and clarify the responsibilities for violating industry regulations. Judging from the composition of the three associations that jointly issued the "Announcement", this announcement is mainly aimed at the Internet finance industry, the banking industry, and the payment and settlement industry, and aims to restrict the transaction, circulation, payment, and settlement of virtual currencies through the regulation of the business level of the three industries. If the "Notice on Preventing Bitcoin Risks" and the "Announcement on Preventing Token Issuance and Financing Risks" are the overall regulations on virtual currencies and related businesses at the national level, then the "Announcement" issued by the three associations is a comprehensive blockade of virtual currency businesses at the industry level. Fourth, some statements in the Announcement should not be used as a legal basis for characterizing virtual currency and related behaviors. The author also noticed that Article 3 of the Notice warned consumers that "consumers should raise their awareness of risk prevention and be careful of property and rights losses". This article, as a risk warning clause, does not have any legal effect. However, the author believes that the statement that "from the perspective of my country's existing judicial practice, virtual currency transaction contracts are not protected by law" is questionable in terms of objectivity, and it is not appropriate to use it as a legal basis for characterizing virtual currency and related behaviors. On the one hand, from the perspective of judicial practice, my country does not deny the property attributes of virtual currency as network virtual property, and existing judicial precedents can also confirm that "the suspected illegal crime of token issuance and financing does not affect the validity of the parties' determination based on the holding and circulation of Bitcoin". Therefore, this lawyer believes that the "Announcement" is not appropriate in its description of the legality of virtual currency transactions. Regarding this issue, the author has already discussed it in the article "Research Series on Virtual Currency-Related Criminal Offenses (II): Is it Legal for Individuals to Buy and Sell Virtual Currency?", so I will not repeat it here. On the other hand, as can be seen from the above, since the Announcement itself is an industry regulation issued by an industry association, it is applicable to self-regulation within the industry and cannot be used as a generally applicable legal norm as a basis for adjudication. Therefore, the statement of the Announcement on this issue does not represent a denial of the legality of virtual currency transactions by national law. This lawyer believes that virtual currency itself is neutral, and there is no natural distinction between right and wrong. Just like a kitchen knife itself is not a weapon, ordinary people use it to cut vegetables, but the perpetrator can use it to hurt people. At this stage, some criminals use virtual currency to engage in illegal and criminal activities, and it is necessary for the state to take corresponding regulatory measures. However, it should also be noted that as individual investors, citizens have the right to choose virtual currency as an investment target for investment, but investment is risky and losses should be borne by themselves. As the bottom line of society, the law should not only combat the infringement of citizens' rights by illegal acts using virtual currency, but also protect the legitimate rights of citizens to invest in virtual currency and adjust civil disputes arising from virtual currency. The above content was originally written by Lawyer Yang Tianyi. If you need to reprint it, please indicate the author and source. Thank you for the appreciation and support of all readers. |
