Cryptocurrency itself is not the "original sin"; the problem lies in whether the transaction process involves cross-border activities, circumvention of currency controls, anonymity, and evasion of regulation.

Written by: Mankun

Introduction

Since the birth of Bitcoin, its price has surged multiple times, driving a global cryptocurrency craze. At its peak, Bitcoin surpassed $100,000, and the total market capitalization of cryptocurrencies even exceeded the global circulation of US dollars at one point. This was followed by a massive emergence of cryptocurrency trading platforms and active over-the-counter trading mediated by USDT.

Under the current policies in our country, some individuals use crypto assets for private exchanges between foreign currencies and RMB, profiting from exchange rate differences and service fees. While this may seem technically harmless, it is, in fact, under legal pressure. Such operations may involve illegal business operations as defined in Article 225 of the Criminal Law and money laundering as defined in Article 191.

In this article, the Mankun lawyer team will combine practical experience to help you understand why crypto trading frequently crosses the "cross-border currency exchange" red line and what you need to pay attention to.

Is Cryptocurrency "Property" or "Data"? How Does the Law Define It?

1. Terminology

The terminology used in domestic and international literature regarding crypto assets like Bitcoin is quite chaotic, with concepts such as cryptocurrency, crypto assets, digital currency, digital assets, and virtual currency often being conflated. The lack of consensus on the nature of cryptocurrencies—whether they are currency, intangible assets, rights, or data symbolizing the rights of holders—has led to varying attitudes from judicial authorities and no definitive conclusions from academia.

2. The Position of Cryptocurrency in Chinese Law

1. From a civil law perspective, cryptocurrency is neither currency nor a security. Civil legislation and judicial practice affirm the virtual property nature of cryptocurrency (Article 127 of the Civil Code), which should be legally protected.

2. From a criminal law perspective, cryptocurrency meets the definition of "property" as stated in Article 92 of the Criminal Law. Cryptocurrency can be transferred for monetary consideration, generating economic benefits, and possesses characteristics such as value, scarcity, and disposability, meeting the criteria for network virtual property and thus is protected by law, making it a form of property.

Although cryptocurrencies manifest as data in a digital or computer information system, we should see their essence as assets or property through their data form. Bitcoin, Ethereum, and others are the digitization of assets, with the core being the asset itself rather than the data. Like a ledger, its value lies not in the paper but in the recorded content. From a criminal law perspective, many contents protected by criminal law, such as trade secrets and state secrets, are presented through data. If an individual uses computer network means to steal digital technical information or state secrets stored in another's computer, it may constitute the crime of infringing on trade secrets or illegally obtaining state secrets, as the data infringed upon represents trade secrets or state secrets.

In simple terms, although crypto assets present as data, they represent tradable and realizable economic interests behind the scenes, and legally, they should be regarded as digital assets with "property attributes."

Why Are Cryptocurrency Transactions Frequently Classified as "Cross-Border Currency Exchange"?

In recent years, an increasing number of cases involving cryptocurrencies have been classified as "disguised cross-border currency exchange" activities, with relevant parties even facing criminal liability. The reason for this is not that cryptocurrencies themselves are illegal, but rather that their transaction paths, technical characteristics, and funding functions highly overlap with traditional illegal currency exchange activities. Specifically, this is reflected in the following aspects:

1. Behavioral Patterns "Simulate" Currency Exchange Processes, Falling into the Category of Illegal Business Operations

Traditional illegal currency exchange often operates through underground banks, proxy currency purchases, and fictitious trade backgrounds. In the cryptocurrency scenario, traders complete value conversion through the path "RMB → Cryptocurrency → Foreign Currency" or the reverse, thereby achieving the goal of circumventing official foreign exchange regulations and breaking through currency purchase limits.

Although such transactions do not directly touch the banking system in form, the result is still illegal exchange between RMB and foreign currencies, constituting "other serious illegal business activities that disrupt market order" as defined in Article 225 of the Criminal Law. In many cases, cryptocurrency platforms, market makers, and intermediaries have been held accountable as key players in the "currency exchange chain," even facing criminal charges.

In judicial practice, cryptocurrency exchange behaviors often exhibit the following characteristics:

• Peer-to-peer matching, no financial license: Transactions are matched through communities or platforms without obtaining foreign exchange or payment business qualifications.

• Decoupling of fund payments and currency flow: Receiving payments domestically while issuing currency abroad, or vice versa, creating a separation between fund transfers and the delivery of crypto assets.

• Clear service nature: Participants charge fees or exchange rate differences, no longer merely "personal asset allocation," but rather providing "currency exchange services."

This "using currency as a bridge, disguised exchange" path essentially uses technical means to circumvent the state's regulatory boundaries on capital projects.

### 2. Technical Characteristics Foster "Concealment" and "High Liquidity," Breaking Through Regulatory Tracking Capabilities

• Anonymity and mixing mechanisms weaken KYC capabilities

The decentralized mechanism of crypto assets allows most transactions to be conducted without real-name verification or reporting, and can even further sever the on-chain association between addresses and identities through mixing services. This "disconnection + mixing" mechanism significantly reduces the ability of regulatory agencies to identify the flow of funds and participants.

• Cross-border transactions have no physical boundary restrictions

Crypto assets can complete cross-border circulation with just the internet, relying neither on bank accounts nor physical channels. A USDT address can send and receive assets at any global node without going through customs, banks, or foreign exchange systems—this technically provides unlimited global transfer capabilities, making regulation much more difficult than in traditional currency systems.

• Breaking through the $50,000 limit through "gray channels"

Some investors use crypto asset channels to exchange RMB for USDT, then exchange it for US dollars, Hong Kong dollars, and other foreign currencies, subsequently transferring funds overseas for investment, purchasing property, or buying cars. This method appears to be merely asset investment but actually exceeds the personal annual limit of $50,000 for foreign currency purchases, constituting "covert currency exchange."

• Difficulty in defining the role of transaction matching, high platform risks

Some platforms, when facilitating over-the-counter transactions, provide addresses, fund custody, exchange rate mediation, and dispute resolution services for both buyers and sellers, exceeding the scope of mere information matching and essentially participating in "currency exchange." Once large transactions or profits from exchange rate differences occur, they are easily regarded by judicial authorities as currency exchange organizers rather than ordinary users.

### 3. Macroeconomic Impact on National Financial Security and Regulatory Order

The payment and pricing functions of crypto assets partially replace the role of RMB in cross-border scenarios. As more domestic funds flow out through "currency-based" methods, the cross-border settlement status of RMB is challenged, which may affect macroeconomic regulation in the long run.

• Formation of a "shadow financial system" parallel to the banking system

The circulation of stablecoins like USDT allows some market participants to bypass the banking system and establish a gray financial network based on on-chain assets. Once intertwined with high-risk behaviors such as overseas gambling, fraud, and tax evasion, it can easily lead to systemic risks.

• Difficulty in tracing the flow of funds, fostering illegal activities

Anonymous transactions + mixing mechanisms + unregulated channels provide convenience for money laundering, terrorist financing, and other illegal activities. This is not only a compliance issue but also a financial anti-terrorism and national security issue.

What Should Individual Investors Pay Attention to When Trading Cryptocurrencies?

1. Avoid Participating in "Proxy Currency Exchange" and "Exchange Rate Hedging" OTC Businesses

Using cryptocurrency as a medium to earn profits from exchange rate differences through cross-border exchange and payment services is a way to circumvent national foreign exchange regulations by utilizing the special attributes of cryptocurrencies. The exchange of "foreign exchange to cryptocurrency to RMB" constitutes disguised buying and selling of foreign exchange. Individual investors should exercise caution to avoid being held criminally liable for "illegal business operations."

2. Strictly Follow Personal Annual Foreign Exchange Purchase Limit Regulations

Buying and selling cryptocurrencies may superficially appear as transactions involving only cryptocurrencies, but in essence, they involve currency value conversion between foreign currencies and RMB, which falls under foreign exchange purchase and settlement. According to the "Implementation Rules for Personal Foreign Exchange Management," personal settlement and domestic foreign exchange purchases are subject to annual total amount management, with an annual limit of $50,000 equivalent per person.

3. Avoid Using Anonymous Recharge Channels

When trading cryptocurrencies, choose platforms with formal KYC processes and ensure transaction records are transparent. Using anonymous channels for recharge, such as P2P over-the-counter trading, mixing services, or privacy coin exchanges, makes it difficult to trace the legality of the source of funds. If suspected of money laundering or funding illegal activities, the platform may freeze accounts, leading to financial losses. Additionally, anonymous channels are prone to exploitation by hackers, compromising the security of user funds.

### 4. Retain Legal Proof Materials

If studying abroad, provide admission letters, tuition payment notifications, and other proof materials to verify the legitimacy of cryptocurrency transaction purposes. If working domestically, retain labor contracts, salary statements, tax payment certificates, etc., to prove that one is not engaged in buying and selling cryptocurrencies as a profession.

Conclusion

Cryptocurrency itself is not the "original sin"; the problem lies in whether the transaction process involves cross-border activities, circumvention of currency controls, anonymity, and evasion of regulation. Once these behaviors are linked to illegal business operations, money laundering, or foreign exchange controls, they may cross the red line.

Not understanding the law is not frightening; what is frightening is rushing into the gray area in a state of "ignorance is bliss." Whether you are an individual investor or a practitioner, you should be clear about the legal boundaries and avoid unnecessary criminal risks before participating in cryptocurrency trading.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。