Does buying and selling foreign exchange through the purchase of virtual currency constitute a crime of illegal business operations?

Regarding virtual currency trading and illegal trading of foreign exchange, there is one case that is not controversial, that is, underground banks realize the conversion of foreign exchange to RMB by buying and selling virtual currency.

Why are virtual currency transactions accepted by a large number of underground banks?

Because under the traditional model, one-way business is easy to cause liquidity problems.

The so-called one-way business means that the underground bank only provides illegal foreign exchange buying or selling within a certain period of time.

For example, underground banks help foreign trade merchants exchange foreign exchange, collect foreign exchange from foreign trade merchants overseas, and pay the corresponding amount of RMB in China. The previous practice of the bank was to form a capital pool of foreign exchange and RMB to achieve a balance of capital flow. After the bank receives US dollars, it needs to U.S. dollars are sold to other customers, exchanged for RMB, and then the RMB is paid to the domestic account of foreign trade merchants. Under this kind of knock-on mode, the underground bank constitutes the crime of illegal business operations. Under the circumstance, underground banks need to keep the balance of US dollar and RMB capital pools at all times, or to achieve the balance of business correspondence, that is, to find both the seller of foreign exchange and the buyer of foreign exchange, and the proportion of one-way business cannot be exceeded within a certain period of time. Otherwise, it will lead to its own lack of liquidity. For example, it will only carry out the business of buying US dollars and paying RMB for a long time, which will eventually lead to insufficient RMB reserves of underground banks and thus unable to carry out business.

The cross-border and convenience characteristics of virtual currency, especially the emergence of stable currency, solve this problem to a certain extent.

For example, after an underground bank receives a demand from customer Zhang San to sell US dollars, the underground bank will use US dollars to buy a certain virtual currency, such as Bitcoin, Ethereum or Tether on a virtual currency exchange, and then pass the exchange through the exchange for a certain period of time. Point sells virtual currency into RMB in China, thus realizing the value conversion of foreign exchange-virtual currency-RMB. During this period, the underground bank can not only earn the handling fee for helping users exchange foreign exchange, but also buy and sell virtual currency. It is possible to achieve profit from the price difference, which not only solves the liquidity problem of one-way business, but also realizes new profit points for underground banks due to capital advantages (of course, there is also a risk of loss). Therefore, a large number of underground banks have begun to become virtual currency exchanges. important customers.

How can this behavior be characterized?

Regarding this model, that is, virtual currency + foreign exchange trading type underground banks, some people believe that there is a certain controversy, that is, whether it constitutes the crime of illegal trading of foreign exchange.

Lawyer Zeng believes that this model constitutes the crime of illegal business operation, and there is no dispute.

The 2019 Judicial Interpretation of the Crime of Illegal Business Operation will define the knock-on model as the crime of illegal business operation, that is, to carry out cross-border capital redemption, and the same currency has only one-way flow abroad and within the country. The underground banks or foreign exchange operators are still for profit in essence, and frequently carry out foreign exchange exchange activities for unspecified objects. The object of this crime is foreign exchange itself, although there is no direct exchange of RMB and foreign exchange in behavior, However, the nature of the behavior is still a business behavior to carry out illegal foreign exchange activities.

There is essentially no difference between a knock-on type underground bank and an underground bank that directly buys and sells foreign exchange. The difference in judicial practice lies in the way evidence is presented, that is, the payment flow of foreign exchange and the flow of RMB payment will occur in different spaces, while the traditional one. The underground banks of reselling and reselling are common in the vicinity of foreign exchange banks and foreign trade specialty stores (or trade markets with developed border trade) in the 1980s and 1990s. They are characterized by first-hand delivery and second-hand delivery. The physical space presented by the evidence may be the same, but this Nor is it absolute. The two modes actually go hand in hand. Even if there is no judicial interpretation of the illegal trading of foreign exchange in 2019, it is not controversial to characterize the knock-on underground bank as the crime of illegal business operation.

And back to the question discussed in this article, that is, underground banks convert foreign currencies through virtual currency, and provide foreign currency-to-foreign currency conversion services, does it affect the criminal characterization of underground banks’ illegal trading of foreign exchange?

The answer is no, and it will not affect it at all. Whether it is the knock-on type underground bank discussed above or the reselling type underground bank, the method of buying and selling virtual currency may be used for capital conversion and capital pool balancing operations. Virtual currency is replaced with other virtual assets, such as game virtual recharge cards, international fund shares, precious metal holding shares, etc. There is actually no difference. In fact, it provides a liquidity solution or money laundering. There is no essential difference between buying and selling virtual currency here, and buying and selling virtual goods such as game point cards. They are both neutral investment behaviors that are not suspected of crimes, but will be used by criminals as money laundering and settlement. Financial Balance Tool.

However, it is also necessary to correctly distinguish the essential difference between the behavior of buying foreign exchange through underground banks in cross-border virtual currency trading and the behavior discussed in this article. Specifically, lawyer Zeng Jie’s previous article “Is it suspected of illegal foreign exchange business?” ”, this article has a more in-depth discussion on virtual currency and illegal trading of foreign exchange. There are essential differences between moving bricks across borders and converting foreign exchange through virtual currency. Although there are certain similarities in appearance, this similarity Sex is the similarity in the eyes of non-legal people, and even people with a little common sense can normally recognize the difference between the two.

However, the supervision of virtual currency transactions, including the supervision of virtual commodity transactions in the future, is believed to be more and more strict and professional.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/does-buying-and-selling-foreign-exchange-through-the-purchase-of-virtual-currency-constitute-a-crime-of-illegal-business-operations/
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