• May 27, 2022

Crypto Transactions Are “Illegal Fundraising”: China

Crypto Transactions Are “Illegal Fundraising”: China
  • The People’s Bank of China Has Previously Banned crypto trading across the Country
  • The new judicial interpretation of the Supreme Court has established a punishment for those who trade cryptocurrencies

China’s initial ban on cryptocurrency activities in September led to a global market-wide crash. At the time, the authorities cited the threat to financial stability and the spread of criminal activities such as money laundering, gambling and fraud as the reason for the takeover. However, the decision was not accompanied by penalties or judicial prosecution for those who acted against it.

This is set to change from March 1, after the country’s Supreme Court ruled on Thursday that it has changed its criminal law regarding the procurement of public funds through virtual assets. The court added crypto transactions to what is considered “illegal fundraising”.

The Apex Court’s ruling means that raising funds through token sales or crypto is formally recognized as a crime. For this purpose, violators are charged in accordance with Article 176 of the Criminal Code. The amount of the penalty depends on the respective amount and the severity of the offense.

The law provides that the defendants face a prison sentence of three to ten years and a fine of between 50,000 RMB ($ 7,900) and 500,000 RMB ($ 79,000). Crimes that are considered less serious are punishable by a three-year prison sentence and a fine of up to 200,000 RMB ($ 31,600). The development is the latest in a series of measures aimed at uprooting the cryptocurrencies in the country.

Confusion over China’s Stance on virtual assets

Although it is clear that China is against cryptocurrencies, there are discrepancies in the rules in this regard. China banned fundraising via digital assets for the first time in 2017, but did not classify the act as a criminal offense. In May, the State Council began suppressing crypto mining and trading.

Later in September, the Peoples Bank of China banned crypto mining and trading in the country. The move led to an exodus of crypto mining companies to less hostile jurisdictions such as Texas, USA.

However, the September ban, which even affects foreign parties trading in crypto with residents of China, is not reflected in the change made this week. The regional authorities in the East Asian country also seem to have different restrictions on crypto-related activities.

For example, crypto mining may be allowed in one province at one time and then banned in the same province at another time. There are also provinces that have declared mining completely illegal. On Wednesday, the coastal province of Zhejiang joined Mongolia and Hainan to increase electricity tariffs for crypto mining.