“Virtual currency” (Cryptocurrency) is positioned as “currency” or “financial investment product” in many propaganda, but no matter how everyone perceives it, it is certain that in the financial field, “virtual currency” is not “currency” . Although there is no legislation specifically targeting “virtual currency” in China, according to the “Announcement on Preventing Token Issuance Financing Risks” (hereinafter referred to as “Announcement 94”) issued by seven ministries and commissions including the People’s Bank of China on September 4, 2017, The so-called “virtual currency” is not issued by the monetary authority, has no monetary properties such as legal compensation and compulsion, does not have the same legal status as currency, and cannot be used as currency in the market.
In addition, according to the “Notice on Preventing Bitcoin Risks” (Yinfa [2013] No. 289) (hereinafter referred to as “Circular 289”), in nature, Bitcoin should be a specific virtual commodity without The legal status equivalent to currency cannot and should not be used as currency in the market. Therefore, according to China’s current financial regulatory policies such as Announcement 94 and Circular No. 289, “virtual currency” is something that has not been legally registered and involves financial and investment attributes. In the financial sector, “virtual currency” is prohibited from being exchanged, bought and sold with legal tender. Or as a central counterparty for trading, or for issuing financing transactions.
However, because of the decentralization of “virtual currency” and the characteristics of offline transactions, it is difficult to make it completely disappear from the perspective of technology and supervision. Therefore, in recent years, people who hold and trade “virtual currency” in China are still widespread. Although this is still a niche market, with the rapid development of the digital economy, more and more people are participating in “virtual currency”, which may have an impact on China’s financial supervision and social order.
The purpose of this article is to analyze the holding and trading of “virtual currency” by Chinese citizens in China based on Announcement 94 and Circular 289. Because of the particularity of the form of “virtual currency” and the technology used, this article will start with multiple scenarios to conduct as comprehensive analysis and discussion as possible.
The “virtual currency” mentioned in this article does not include legal digital currencies that have been issued or will be issued by various countries, and this article does not involve the use of “virtual currency” as a means of payment or collection for purchasing, investing or operating traditional businesses in China. .
1. Acquisition of “virtual currency”
1. The party is a natural person, and in China, without paying any consideration, obtaining “virtual currency” through mining, airdrops or accepting gifts, etc., Announcement 94 and Circular 289 are not expressly prohibited, but financial supervision The level does not support the above activities;
2. The party is a natural person, and the “virtual currency” obtained from an organization or individual by paying legal tender within China is not expressly prohibited in Announcement 94 and Circular 289, but the organization or individual that sells virtual currency may Suspected of breaking the law due to selling, providing exchanges between legal currency and “virtual currency”;
3. The party concerned is a Chinese citizen who purchases “virtual currency” from any other party through legally exiting funds outside of China. Announcement 94 and Circular 289 do not expressly prohibit it;
4. The parties themselves hold a certain “virtual currency” obtained legally, and obtain another “virtual currency” through currency-to-currency transactions. The 94 Announcement and Circular 289 did not give it to them without involving money laundering. Explicitly prohibited.
2. “Virtual Currency” Selling and Withdrawing
1. The holders give away the “virtual currency” they hold to others for free. Announcement 94 and Circular 289 are not expressly prohibited, and Circular 289 defines Bitcoin as a virtual commodity, which is understood from a legal perspective as a virtual commodity. The gift of goods should belong to the scope of autonomy of will, but the recipient must declare personal income tax to the Chinese tax authorities on the assets obtained for free. If the tax declaration is not made, it is suspected of tax evasion;
2. The holder buys “virtual currency” in China by paying RMB, and then sells it to foreign currency in any form, or the holder buys “virtual currency” overseas by paying foreign currency, and then passes any The form of selling and withdrawal is RMB. Under the above-mentioned circumstances, no matter how many currency transactions are converted between buying and selling, it essentially violates the relevant regulations of China’s foreign exchange control and is suspected of money laundering;
3. The holder is a Chinese citizen. After the “virtual currency” is sold and cashed out, regardless of the region and currency, as long as there is a profit, the individual must declare personal income tax to the Chinese tax authority. If the tax declaration is not filed, it is suspected of tax evasion Tax evasion
4. The holder transfers the legally acquired “virtual currency” to others in the form of person-to-person transactions without involving money laundering and tax evasion. Announcement 94 and Circular 289 do not expressly prohibit it, but Not encouraged by policy;
5. If the holder is a Chinese citizen, if he knowsly sells the “virtual currency” he holds to others, and assists others in illegally entering and leaving the country in disguise, he is also suspected of money laundering crime. If the funds of others are illegally obtained , It may involve more crimes.
3. “Virtual currency” transaction services
1. Any organization or individual providing “virtual currency” information in China, including providing matching information for transactions between individuals, involving the provision of pricing and information intermediary services for tokens or “virtual currency” as specified in the 94 Announcement shall be prohibited ；
2. Any organization or individual who provides “virtual currency” transaction services within or outside China, establishes RMB channels and fund pools within China, and collects transaction fees is prohibited by law;
3. Any organization or individual issuing “virtual currency” and raising funds in RMB is prohibited by law and is suspected of illegally absorbing public deposits or fund-raising fraud;
4. Any organization or individual who issues “virtual currency” or provides corresponding transaction services in China to form an organizational system and conduct business through transactions between individuals is prohibited by law and is suspected of illegal business operations and illegal absorption of public deposits Or fundraising fraud. If there are different levels and commission mechanisms in the organizational system, they may also be suspected of pyramid schemes;
5. Any organization or individual that uses the transaction characteristics of “virtual currency” to subjectively provide funds entry and exit services that bypass China’s foreign exchange control is like an underground bank service and is suspected of money laundering.
Generally speaking, if an individual wishes to purchase and hold “virtual currency” in China, it can be achieved in a relatively legal way, but in the process of selling, the possibility of breaking the law is high. Any “virtual currency” issuance and transaction services that are organized in China and involve a pool of funds basically violate China’s current laws and regulations.
In the judgment documents of many local courts, “virtual currency” is recognized as an asset and protected. Mining to obtain “virtual currency” does not violate the prohibitive provisions of Announcement 94 and Circular 289, but it requires a channel to realize cash. The personal acquisition of “virtual currency” from mining companies does not violate the prohibition provisions of the above-mentioned 94 Announcement and Circular 289, but after the acquisition, re-sales may trigger anti-money laundering and anti-illegal fund-raising financial supervision, resulting in account damage Legal responsibilities such as closure.
After more than ten years of development, “virtual currency” has a very positive significance in the popularization of blockchain technology, and the development of “virtual currency” has also accelerated the active research and promotion of legal digital currencies by various countries’ currency management departments. The widespread use of legal digital currency will greatly promote the efficiency of capital circulation and will have a huge positive impact on the business world. All of this has also benefited from the innovation and experimentation of the “virtual currency” industry. The main difference between legal digital currency and “virtual currency” lies in whether it is legally associated with offline assets. At present, “virtual currency” still exists in the form of financial games or analog disks, and has nothing to do with real-world labor and production. To break through this limitation, countries need to implement detailed legislation on digital assets and link offline assets through laws On Token, a string of codes similar to the current information system of stock exchanges represents the legal holding of equity.
No matter how positive the “virtual currency” has on the popularization of blockchain technology, at the practical level, holding and trading “virtual currency” must strictly abide by the laws and regulations of the country where it is located. The public should have a certain understanding of China’s relevant laws and regulations on “virtual currency” so that they can strictly abide by laws and regulations when they come into contact with “virtual currency”. The “virtual currency” has a very small audience and strong professionalism. It is recommended that the general public do not get involved without relevant knowledge to avoid breaking the law unconsciously.
