On May 21, the State Council’s Financial Stability and Development Committee meeting issued clear requirements for “combating Bitcoin mining and trading activities.” In view of this, Bitcoin mining and other cryptocurrency mining activities will be implemented in my country. Determine the exit history, and relevant companies and suppliers must not have any illusions.
1. The regulation of “mining” has long been traced
It is true that my country’s blockchain technology and digital currency started earlier. After the 94 announcement of currency exchanges going to the sea, ICO transfers to Singapore, various countries tried Howe testing and regulatory sandboxes, and Chinese people have always been the masters of the mining industry. At the same time, there are more Chinese people who participate in speculating on encrypted digital tokens such as Bitcoin, and of course there are also many South Korean participants next door.
The concentration of speculators and the concentration of miners have revived the currency circle in recent years. The skyrocketing price of Bitcoin has posed a threat to the financial security of all countries. As early as January 2018, the Office of the Leading Group for the Special Rectification of Internet Financial Risks issued a document requiring local governments to guide mining companies in their jurisdictions to exit in an orderly manner. Locally, the “Notice on Guiding the Orderly Exit of Virtual Currency “Mining” Enterprises in Our Region” in Ordos requires “restriction of “innovations” that deviate from the needs of the real economy and circumvent supervision. The virtual currency mining industry is a pseudo-industry that has nothing to do with the real economy. Financial innovation should not be supported. Based on this, we must make mistakes and comprehensively adopt measures such as electricity prices, land, taxation, and environmental protection to guide relevant mining companies to exit in an orderly manner and encourage the transition to state-supported cloud computing.” 18 of this month On the same day, the three associations jointly issued the “Announcement on Preventing the Risk of Hype in Virtual Currency Transactions”, emphasizing that financial institutions, payment institutions and other member units must not use virtual currencies to price products and services, or directly or indirectly conduct virtual currency-related businesses.
At the same time, in April 2019, the National Development and Reform Commission published the “Industrial Structure Adjustment Guidance Catalog (Draft for Comment)”, which classified virtual currency mining as a category that should be eliminated, but in the official version released that year, the mining currency was removed from the list of elimination . On May 21, 2021, the Financial Stability and Development Committee of the State Council convened a meeting to clarify “combat Bitcoin mining and trading.”
2. What are the legal consequences of continuing to mine?
A few days ago, some alumni asked if there were mining machines that could be dispatched. Sister Sa’s presence in the field, Cao did not find it difficult to raise the scarce resources at that time. But it can be seen from this that the popularity of mining and the enthusiasm of the participants. Where there is demand, there is supply. It can be predicted that people who have bought mining machines cannot easily discard them, and there should be a lot of people who continue to transfer to “underground” mining.
The most important legal risk is: the crime of illegal business operations in Article 225 of the Criminal Law.
Specifically, the following elements must be judged:
(1) Is mining a business activity?
According to the Anti-Unfair Competition Law, operators refer to natural persons, legal persons and unincorporated organizations engaged in the production, operation or provision of services. Coin mining is the act of increasing the supply of virtual coins, that is, the act of producing tokens, and it is likely to be regarded as an operating act.
(2) Whether it violates the pre-law
Just like the lesson of the online lending industry, the currency circle actually has a pre-method, but it is ignored by the vast majority of practitioners intentionally or unintentionally. The “People’s Bank Law” and the “Renminbi Management Regulations” both emphasized that no unit or individual may print or sell tokens and coupons to replace the renminbi in circulation in the market. Today, the interpretation range of token tickets includes digital tokens and so on.
(3) Fall into item 4 of Article 225 of the Criminal Law
“Engaging in other illegal business activities, disrupting the market order, with serious circumstances” constitutes the crime of illegal business operations. The mining activity objectively disrupts the market order. If the circumstances are serious enough in the case, it constitutes a crime. The maximum sentence is 15 year. If it does not reach the seriousness of the circumstances, a fine of less than 200,000 yuan can be imposed in accordance with administrative violations (this amount will be adjusted to 20 million yuan after the Banking Law is amended).
3. Contracts and futures trading
Musk’s remarks have affected the price of the currency. If it is in the legal secondary trading market, his remarks will be severely punished by the law. However, it is because digital currency knows no borders and the different regulatory attitudes of various countries have led to the continuous cutting of leeks.
From some pictures and messages circulated by people in the currency circle, we found that players engaged in contracts and futures trading with China Capital suffered heavy losses, and even one company almost completely liquidated its position. Sister Sa is also a financial veteran, and she is still in awe of finance, but many players don’t think they are playing financial derivatives. They think they are playing house and heartbeat, the pain of returning to the pre-liberation overnight. I hope you don’t try it lightly. .
The French Open is intact, but not leaking. The third item of Article 225 of the Criminal Law clarifies: “Illegal operations in securities, futures, and insurance businesses without the approval of relevant state departments, or illegally engaged in fund payment and settlement business” constitute the crime of illegal operations. Judging from the cases handled by Sister Sa personally, the local financial supervisory authorities have never been stingy about issuing “illegal futures business” letters. Therefore, some companies in the currency circle doing futures business are very likely to be identified as illegal futures and enter the third regulatory scope.
Readers with a legal basis may say that “crimes and penalties are statutory” and the contract does not stipulate that no crime is constituted in the legal provisions. In practice, it may be handled in this way, either by interpreting the contract as a type of futures, or using the fourth bottoming clause to deal with it. However, Sister Sa thinks there is room for defense.
Write at the end
Readers are also entangled in the reasons why the mining circle is gone. In fact, since Musk grabbed Bitcoin’s energy consumption, he realized that if one day BTC is encircled by various countries, it will basically protect the environment.
In fact, fundamentally speaking, Bitcoin was born in 2008 with Hayek’s thought, which is inconsistent with the current world structure of the country as a unit, and the laws of various countries are also an extension of state management. Therefore, the popularity of Bitcoin and other tokens is incompatible with the current laws. The conflict is obvious.
Therefore, the continued mining of encrypted tokens will continue to oppose the law, not only in my country, but the cautious attitude of various countries towards digital tokens will be reflected in all aspects. With the erosion of legal currency and financial security by virtual currencies, the laws of various countries will continue to oppose the law. Enforcement will only become stricter. Whether you like it or not, the law is there and it’s not in vain.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.