Author: Lawyer Liu Zhengyao
Introduction
On August 25, the Supreme People's Court and the Supreme People's Procuratorate issued the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Concealing and Hiding Criminal Proceeds and Their Gains" (hereinafter referred to as the "Concealment Crime Interpretation"), which imposes stricter standards for determining subjective knowledge, while also clarifying or optimizing various circumstances regarding the threshold for criminalization, aggravated punishment, and leniency in punishment.
The most noteworthy change is that the previous standard for determining "serious circumstances" has shifted from concealing or hiding 100,000 yuan to a dual standard of "amount + circumstances." The general threshold for concealing or hiding amounts is now set at 500,000 yuan, and it must meet corresponding circumstances (such as multiple acts of concealment, refusal to cooperate in recovery, causing losses of over 2.5 million yuan, etc.), significantly raising the threshold for "serious circumstances" (with corresponding prison terms of 3 to 7 years).
For cryptocurrency practitioners, although the "Concealment Crime Interpretation" does not mention virtual currency in the text of the judicial interpretation like the interpretations in illegal fundraising and money laundering cases, relevant leaders from the "Two Highs" mentioned the role of virtual currency in concealing crimes during a press conference, with the first typical case being an individual using an exchange to launder money.
The press conference for the "Concealment Crime Interpretation," image source: Supreme People's Procuratorate
Lawyer Liu provides a simple analysis of the "Concealment Crime Interpretation" in this article and discusses its potential impacts on the crypto space, hoping to offer some subtle insights for the web3 industry.
I. What Does the "Concealment Crime Interpretation" Say?
This section is a "habitual action" of the author as a legal practitioner and may be more suitable for peers in the field. Friends outside the legal industry can skip this part if not interested.
(A) Summary Level
The "Concealment Crime Interpretation" consists of 12 articles and covers five main areas:
First, it clarifies the applicable scenarios for the "other methods" catch-all clause in Article 312 of the Criminal Law;
Second, it strictly defines the standards for determining (presuming) the subjective "knowledge" of the perpetrator;
Third, it modifies the "amount-only theory," placing greater emphasis on the determination of "amount + circumstances";
Fourth, it significantly raises the threshold for determining "serious circumstances" in concealment crimes;
Fifth, it adds circumstances for leniency in punishment.
(B) Detailed Analysis
The new judicial interpretation has been "upgraded" in the following aspects:
First, regarding means of conduct, previous judicial interpretations did not clearly specify this, but the new interpretation clarifies other methods in the criminal law text, including: "any means sufficient to conceal or hide criminal proceeds and their gains, such as intermediary introductions for buying and selling, receiving, holding, using, processing, providing funding accounts, converting property into cash, financial instruments, or securities, transferring funds through transfers or other payment settlement methods, and cross-border asset transfers";
Second, in terms of presuming subjective knowledge, the new interpretation requires "caution in presumption," specifically stating: "should be based on the information the perpetrator has been exposed to, the circumstances of handling others' criminal proceeds and their gains, the types and amounts of criminal proceeds and their gains, the methods of transfer and conversion, abnormal transaction behaviors, and funding accounts, combined with the perpetrator's professional experience, relationship with upstream criminals, and their confessions and defenses for comprehensive examination and judgment";
Third, there has been a significant change in the amount threshold for determining "serious circumstances," rising from the previous standard of concealing or hiding 100,000 yuan to a threshold of 500,000 yuan (for crimes with relatively high conviction and sentencing standards, such as illegal mining, the threshold is set at 5 million yuan); and it must also meet one of the conditions such as "multiple acts of concealment," "refusal to cooperate in recovery," or "causing losses of over 2.5 million yuan."
In summary, the new "Concealment Crime Interpretation" aligns more closely with the principles of legality in criminal law and the criminal policy of balancing leniency and severity.
II. Analysis of Typical Cases Involving Cryptocurrency
The "Two Highs" also released typical cases, with the first case involving individuals An, Chen, and Guo using the purchase of virtual currency on the OKEX exchange to conceal crimes.
Case Summary: In September 2020, An, Chen, and Guo contacted an online fraud group and, as instructed by their upstream contacts, provided multiple bank cards to receive funds, and then purchased virtual currency on the OKEX exchange with the received funds, subsequently transferring the virtual currency to the designated account of their upstream contacts, who paid the three a commission based on a ratio. Ultimately, the court found that An, Chen, and Guo "knew that the funds were criminal proceeds of others and used virtual currency and other means to assist in the transfer of criminal funds, constituting the crime of concealing and hiding criminal proceeds, and the circumstances were serious."
The "Two Highs" believe that with the rise of blockchain technology and virtual currency, some individuals use virtual currency for rapid fund transfers, and the methods of concealing crimes are constantly evolving, but these behaviors can all be covered under the "other methods" specified in the concealment crime (Article 312 of the Criminal Law). Judicial authorities must penetrate the manifestations of fund flows to accurately identify new criminal methods.
The aforementioned case can only be seen as a negative behavior where individuals used virtual currency for money laundering. While there are indeed groups among cryptocurrency practitioners engaging in illegal activities such as Ponzi schemes, gray industries, and money laundering, there are also individuals actively building the web3 industry. Beyond those engaged in illegal activities, we need to further analyze what impacts the new judicial interpretation will have on the entire crypto space.
III. What Impact Will the New Judicial Interpretation Have on the Domestic Crypto Space?
In my personal view, the "Concealment Crime Interpretation," along with previous judicial interpretations on illegal fundraising and money laundering, combined with the current regulatory policies on virtual currency in mainland China, means that everyone should pay attention to at least the following four aspects:
(A) Further Tightening of the Flow of Funds Related to Virtual Currency
In recent years, virtual currency (especially USDT) has often been used as a tool for fund transfers in many telecom fraud, online gambling, pyramid schemes, and illegal business cases. The issuance of the interpretation means that judicial authorities can more easily determine that "assisting in exchanging, cashing out, or transferring virtual currency" constitutes a concealment crime, lowering the difficulty of evidence collection and conviction. Even if you do not directly participate in upstream fraud, merely providing exchange or payment services may also be deemed as aiding in concealment crimes.
(B) Increased Crackdown on "Score Running and Coin Laundering" Gray Service Chains
To this day, some practitioners in the crypto industry operate in a "gray area," providing exchange services between virtual currency and RMB (this business is currently considered illegal financial activity in mainland China). The new judicial interpretation emphasizes that "knowing or should have known" is sufficient for criminalization, which seems to give judicial authorities greater discretion in cases involving virtual currency. Such businesses will likely face comprehensive crackdowns, with risks sharply increasing.
(C) Clearer Boundaries Between Compliance and Illegality
In mainland China, activities related to virtual currency have long been classified as illegal financial activities (see "Notice 9.24"), but some still evade this by claiming "technical services" or "currency exchange." The issuance of the new judicial interpretation further confirms that any on-chain or off-chain services suspected of "coin laundering" will trigger criminal liability risks.
(D) Increased Compliance Pressure on the Industry
For leading blockchain companies, research institutions, and technical teams, even if they do not directly engage in trading, they need to be cautious about customer usage when involved in wallet development, on-chain analysis, and risk control technology. If the services provided involve the flow of criminal funds, they may face risks of "knowing or should have known."
IV. Author's Recommendations for Web3 Practitioners in Mainland China
(A) Stay Away from "Black Market Channels" in RMB and Virtual Currency Exchange
In any scenarios involving the buying and selling or payment of virtual currency, any private matchmaking, collection and payment, cashing out for others, or acceptance of payments are highly likely to be deemed as aiding criminal activities. Whether as individuals or companies, remember not to engage in "currency exchange or score running" businesses involving cryptocurrency.
(B) Enhance Compliance Review Capabilities
If you are a blockchain enterprise (wallet, risk control, on-chain analysis, technical development), you must clearly state in contracts, user agreements, and risk control processes that relevant business activities or technical tools must not be used for illegal activities and commit to cooperating with law enforcement investigations.
(C) Treat "Investment and Financial Projects" Cautiously
In the current web3 entrepreneurial environment in mainland China, almost all "high-yield virtual currency financial projects" may be classified as illegal fundraising, fraud, pyramid schemes, operating casinos, or illegal business activities. Participating in such projects not only risks financial loss but may also involve concealment crimes.
(D) Preserve Evidence and Strengthen Compliance Endorsement
Web3 practitioners should do the following three things:
Preserve records of customer communications and transaction reviews;
Clearly state "prohibition of money laundering purposes" on official websites and apps;
Report suspicious transactions to regulatory authorities in a timely manner or refuse to provide corresponding services.
These can serve as strong defense materials for "not knowing" during judicial reviews.
(E) Shift Towards Technology and Internationalization
As mentioned earlier, mainland China is currently not suitable for web3 entrepreneurship, and "virtual currency trading" has no compliant development space. There are three genuinely safe paths for web3 entrepreneurship:
First, engage in the research and development of underlying blockchain technology (consortium chains, cross-border settlement technology);
Second, conduct compliant business in places like Hong Kong and Singapore;
Third, meet domestic R&D needs while implementing abroad through cross-border structures.
In summary, the "Concealment Crime Interpretation" adds another layer of restrictions in the "crypto space." In the future, practitioners in the crypto industry in mainland China must stay away from any fund channel-related businesses and shift their focus to technology development, on-chain compliance applications, and international market layouts; otherwise, they risk easily getting involved in criminal liabilities.
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