The key to the confiscation of illegal gains from "climbing over the wall to trade in cryptocurrencies" lies in the studio's business behavior

Here is the English translation of the text, with the specified terms translated as requested: "'Crypto Sphere' Users Lose Illegal Gains for 'Circumventing the Great Firewall' to Trade Crypto" The key lies in the operational behavior in the workplace. For domestic crypto traders, what are the legal risks of using 'VPN' to circumvent the Great Firewall and trade crypto, and why do they have their crypto gains confiscated? Today, I will share my views on this.

"Circumventing the Great Firewall" is Illegal Behavior

Currently, China's internet firewall uses a blacklist model to restrict access to foreign websites. "Circumventing the Great Firewall" to access blocked foreign websites is essentially using overseas servers not on the blacklist as a proxy. The behavior of "VPN circumvention" exists not only in the crypto sphere, but also in foreign trade, the internet industry, and even university research. However, according to Article 6 of the "Interim Provisions on the Administration of International Networking of Computer Information Networks", any unit or individual is not allowed to establish or use other channels for international networking on their own. So the behavior of using a proxy to bypass the national firewall and access the internet is illegal. Regarding the administrative penalties for "circumventing the Great Firewall": Article 14 of the "Interim Provisions" stipulates that those who violate Article 6, Article 8, and Article 10 of the Provisions shall be ordered by the public security organ to stop networking, given a warning, and may be fined up to 15,000 yuan; if there are illegal gains, the illegal gains shall be confiscated.

"Circumventing the Great Firewall" to Trade Crypto Leads to Confiscation of Illegal Gains

Cross-border e-commerce and foreign trade companies that want to use legal means such as dedicated lines for cross-border networking can legally rent them from telecommunications business operators with international communication entry and exit licenses. Currently, only the three major operators can provide cross-border VPN service licenses.

"Crypto" Risks

In the cases with case numbers (2024) Qiong 0108 Civil 4091 and (2024) Qiong 0108 Civil 8859 tried by the Meilan District People's Court in Haikou City this year, the plaintiff and defendant signed a TikTok international version incubation service agreement, but the plaintiff's income did not match the defendant's initial promise, so the plaintiff sued to demand the defendant return the fees. The court finally ruled that TikTok needs to be used through "VPN circumvention", which violates Article 6 of the Interim Provisions, so the contract is invalid and supported the plaintiff's claim for refund of fees.

In addition, the behavior of setting up overseas servers to provide circumvention proxy tools may constitute the crime of refusing to perform information network security management obligations, the crime of assisting in information, and other cybercrimes.

Why is "Crypto" Trading After Circumvention Confiscated as Illegal Gains

From the above, it can be seen that personal "circumvention" to access overseas websites is indeed illegal, but the relevant regulatory documents in China do not say that personal holding of virtual currencies and trading of virtual currencies by buying at low prices and selling at high prices are illegal. However, why did the Hubei public security punish the studio for "circumvention" trading virtual currencies?

From this administrative penalty decision circulating online, it can be seen that the boss of the studio is Liao, and the studio has a total of four employees. The studio's operating model is to contact customers who need to buy coins on the exchange, use **currency to buy virtual currencies on the exchange, and then sell the purchased coins at a high price to overseas coin-buying customers in the OTC market. The **currency in the penalty decision may be referring to the legal currency of a certain country, which is used to distinguish it from virtual currencies. In short, the studio's profit model is to buy coins on the exchange and sell them at a high price in the OTC market to make a profit.

This studio arbitrage model is different from the ordinary individual user buying BTC at a low price and selling at a high price to make a profit from the price appreciation. The essence of the domestic studio owner hiring employees to make a profit from the spread is a business operation. The "Notice on Further Preventing and Disposing of the Risk of Virtual Currency Trading and Speculation" stipulates that virtual currency-related business activities are illegal financial activities, including acting as a central counterparty to buy and sell virtual currencies and providing information intermediary and pricing services for virtual currency transactions. This domestic studio, as an intermediary, provided the business operation of selling virtual currencies at high prices, so the public security agency confiscated the illegal gains.

Summary and Reflection

Many crypto traders were immersed in the joy of the judicial documents issued by the Shanghai High Court and the Jiangsu Liangshui Court a few days ago that virtual currencies are considered as property, but this week they are panicked and anxious due to the news of the Hubei "circumvention and crypto trading" being fined and confiscated.What I want to tell everyone is that personal crypto trading has never been illegal in China, and the risks that need to be paid attention to are the potential criminal risks involved in deposit and withdrawal, as well as the losses of virtual currencies caused by entrusted investment and trading, after all, the judicial protection of virtual currencies in China is relatively weak.

However, for those who want to engage in some studio arbitrage, OTC and other coin-related business operations in China, the risks are still very high, and going overseas is the safest way. In recent years, the regulatory and law enforcement authorities have first cracked down on some domestic exchanges and project parties, and then in the past two years, the OTC merchants, which is a gradual restriction on the development of virtual currency-related businesses in China.

Disclaimer: As a blockchain information platform, the articles published on this site only represent the personal views of the authors and guests, and are not related to the position of Web3Caff. The information in the articles is for reference only and does not constitute any investment advice or offer, and please abide by the relevant laws and regulations of your country or region.