Dialogue with Fire Law: Future Encryption Supervision Situation, Zhao Dong Case Analysis, OTC Dynamics

1. First of all, congratulations to our old friend, Lawyer Huo, for having a new job recently. Is it convenient for readers to introduce your resume and new job?

Lawyer Huo: Thank you, Wu, for a serious introduction, Huo Yijie, a lawyer who specializes in criminal matters. What everyone is more familiar with should be the public account name “Huo Xiaolu”. I have worked in the Shanghai procuratorial system for 7 years, mainly handling various criminal cases. After resigning, he worked in legal compliance work in an Internet listed company and then transferred to a lawyer. At present, it has been officially transferred to Shanghai Gelian Law Firm, and its main business directions are: commercial crime and corporate compliance, criminal defense, and dispute resolution; characteristic industry areas are: Internet industry, financial technology industry.

2. Recently, China’s cryptocurrency industry has ushered in strong supervision, requiring “to combat Bitcoin mining and trading, and resolutely prevent the transmission of individual risks to the social field”. What do you think of this regulatory storm and what is the expected future trend?

Lawyer Huo: One of the core nodes of this regulatory storm was the 51st meeting of the Financial Committee of the State Council on May 21. The focus should be on the word “strike”. As far as I have worked in the system, I know that the scrutiny of some manuscripts within the system is relatively cautious. This time the final word is the use of “strikes” instead of “orderly clear retreat” and other mild terms, which shows the determination of the supervisory authority. Administrative agencies have always implemented strict implementations, at least in the general direction. Coupled with the current continuing high incidence of financial risks and stakeholder risks. Therefore, in the short term (within 1-2 years), it is still the trend of strict supervision, and it is more likely to be one size fits all.

3. The latest time the deputy governor of the central bank mentioned the risks of stablecoins in detail for the first time. Is it possible to strike against stablecoins such as USDT in the future?

Huo Lawyer: USDT, as a global stable currency, has two main risks: finance & law. The central bank’s initial consideration was more on monetary policy and its impact on legal currencies. As USDT’s application in illegal activities such as speculation, payment, gambling and money laundering has gradually become prominent, it is attracting more attention from the regulatory authorities, which has advantages and disadvantages for the industry. The currency circle is still a niche group, and there are not many professional investors. Outsiders also need to continuously strengthen their comprehensive understanding of the circle. From this perspective, it is a good thing to attract attention. However, once a certain currency or the entire industry forms a certain scale and system, it is difficult to reflect the positive effects, and a blow may be inevitable.

4. The Zhao Dong case has attracted much attention, but it seems that the case will come to an end smoothly. What do you think of this case and the risks faced by Chinese OTC companies?

Lawyer Huo: The facts of the Zhao Dong case have not been disclosed by the authorities. According to relevant media reports, the 2kw+ involved turnover, the 3w+ profit amount, and the probation, compared with the daily OTC, the deterrent effect on the industry is obviously far from enough.

The biggest risk of OTC merchants still comes from the disposal of funds. The first is the review of funding sources. This part of the work belongs to the basic obligation of OTC merchants. Once it is left unchecked, or the funds are still assisted in processing if they know that the funds are illegal proceeds, they are most likely to be suspected of crimes of helping information cybercriminal activities, concealing, concealing criminal proceeds, etc. The second is the issue of exchange of funds. If foreign exchange is involved, it may also be suspected of illegal business operations.

5. At present, there is a view that the government may require that the RMB OTC be completely shut down in the future, but this may also lead to the underground, and it will be more difficult to combat suspected telecom fraud and money laundering. What do you think?

Lawyer Huo: Blocking is worse than sloughing. I understand the truth. The road to embracing compliance supervision is a long one. The government’s thinking on cracking down can refer to the concepts of “crime of helping trust” and “card breaking activities”. It is precisely because of the rampant telecommunications fraud, the rapid transfer of stolen money, and the difficulty of combating, that the focus is on cracking down on “card-providers.” Whether the industry will shut down completely depends on the industry itself to give the answer. Take the early P2P as an example, from the initial thriving and vigorous development, to barbaric growth, disorderly operation, to almost all cutting leeks, the end can only be-leaving the field sadly. Back to OTC, the potential risks of shutdown vs. the drawbacks of continuing operations. When the latter is far greater than the former, the answer is self-evident.

6. The digital renminbi is in full swing, and a white paper has also been released, but it seems that in some official descriptions, it is opposed to cryptocurrency, or as a response to the challenge of cryptocurrency/stable currency. With the official focus on promoting the digital renminbi, will it have a negative effect on the cryptocurrency/blockchain?

Lawyer Huo: The core of the official attitude is the public’s ignorance and repeated hot spots in the cryptocurrency circle. The promotion of digital renminbi is the general trend, but every official push will lead to a wave of “little knowledge”, resulting in the government having to make strict distinctions and even oppositions. It seems that in the early years, when talking about the development of blockchain, the media advocated that the currency circle is good; when talking about the protection of virtual property, the media said that cryptocurrency is protected by law.

But in principle, the promotion of digital renminbi will not have a negative effect on cryptocurrency/blockchain. As a technology, blockchain still has a lot of room for development. As far as investment products are concerned, cryptocurrency does not conflict with the digital renminbi, but in some illegal areas it will cause financial risks for stakeholders and the loss of assets.

7. Recently, it seems that in civil cases, there is no longer recognition of contract disputes involving cryptocurrency. Will it become a normal state?

Lawyer Huo: This is a very good question. Regarding civil disputes over virtual currencies, there are many examples of different judgments in the same case. The core reason is still the different perceptions of courts in different regions. This may have something to do with the judges’ research and judgment on policy documents and related precedents. In some areas, there are more researches on virtual currency disputes, and the judging ideas are updated with the times; in other areas, judgments made two or three years ago may still be referenced. Also based on the above reasons, I myself have always emphasized that before there is a unified national awareness, relevant personnel must find the right place of jurisdiction when seeking litigation solutions. The Beijing High Court has a second-instance judgment this year, which approved the currency transaction between two natural persons. I believe that a few more similar judgments will play a good exemplary role in handling similar cases. Finally, I would like to remind once again that the case is different, and the details determine success or failure. Consult professional and knowledgeable lawyers in a timely manner to protect their legitimate rights and interests.

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/dialogue-with-fire-law-future-encryption-supervision-situation-zhao-dong-case-analysis-otc-dynamics/
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