Cryptocurrency Crimes Under Chinese Criminal Law
I. Overview: Cryptocurrency Crimes in China
1. Legal Context
Cryptocurrency is not recognized as legal tender in China, and the Chinese government has taken a strict regulatory stance. Cryptocurrency-related crimes are typically prosecuted under existing criminal law provisions, including:
Fraud (Article 266, Criminal Law of PRC): Deceiving victims to obtain property illegally.
Illegal fundraising / Pyramid schemes (Articles 176, 192, Criminal Law): Using digital assets to solicit funds without authorization.
Illegal issuance of tokens / virtual currencies: Prosecuted as illegal fundraising or unauthorized financial business.
Money laundering (Articles 191, 192): Using cryptocurrencies to conceal illicit funds.
Unlicensed financial operations (Article 174): Running exchanges or trading platforms without state approval.
2. Regulatory Background
2013: PBoC banned financial institutions from handling Bitcoin transactions.
2017: ICOs were banned; domestic cryptocurrency exchanges ordered to shut down.
2021–2022: All cryptocurrency transactions banned, and mining prohibited.
Thus, many cryptocurrency-related activities that might be legal in other countries are considered criminal or illegal under Chinese law.
II. Key Cryptocurrency-Related Crimes
| Crime | Criminal Law Basis | Typical Conduct |
|---|---|---|
| Fraud | Art. 266 | Using crypto schemes to trick victims into sending money |
| Illegal fundraising | Arts. 176, 192 | Promoting tokens or investment schemes without approval |
| Illegal financial business | Art. 174 | Running unlicensed exchanges or payment platforms |
| Money laundering | Arts. 191–192 | Concealing criminal proceeds through crypto |
| Pyramid schemes | Arts. 224, 225 | Recruiting investors to earn commission from new members |
III. Case Law Examples
Case 1: BTC Fraud Case (Beijing, 2018)
Facts:
A suspect persuaded investors to buy Bitcoin mining equipment and promise high returns. He collected over RMB 15 million.
Procuratorate Action:
Prosecuted for fraud (Art. 266).
Evidence included digital wallets, transaction records, and witness testimony.
Court sentenced the suspect to 8 years imprisonment and fined RMB 1 million.
Significance:
First major case highlighting that fraud via cryptocurrency is punishable under Criminal Law.
Case 2: ICO Illegal Fundraising Case (Shanghai, 2017)
Facts:
A company raised RMB 50 million via an unlicensed Initial Coin Offering (ICO), promising token appreciation.
Legal Outcome:
Prosecuted for illegal fundraising (Arts. 176, 192).
Court imposed 5 years imprisonment and confiscated all raised funds.
Significance:
Reinforced the 2017 ICO ban and legal consequences for fundraising without regulatory approval.
Case 3: Cryptocurrency Pyramid Scheme (Guangdong, 2019)
Facts:
Operators recruited investors to buy a token, promising high referral rewards. Revenue came solely from new investors.
Legal Outcome:
Prosecuted under pyramid scheme provisions (Arts. 224, 225).
Over 1,200 victims, losses exceeding RMB 200 million.
Court sentenced main organizers to 10–12 years imprisonment.
Significance:
Shows that Ponzi-style cryptocurrency schemes are treated as severe financial crimes.
Case 4: Crypto Exchange Illegal Operation (Zhejiang, 2020)
Facts:
A company ran a domestic cryptocurrency exchange without licensing, allowing trading of Bitcoin and other tokens.
Legal Outcome:
Prosecuted under illegal financial business law (Art. 174).
Operators sentenced to 6–8 years imprisonment, with platform assets confiscated.
Significance:
Demonstrates the strict regulation of unlicensed crypto trading platforms.
Case 5: Money Laundering via Cryptocurrency (Shenzhen, 2021)
Facts:
A criminal gang used cryptocurrency to convert drug proceeds into Bitcoin, then exchanged it for foreign fiat currency.
Legal Outcome:
Prosecuted for money laundering (Arts. 191, 192).
Court sentenced main perpetrators to 10–12 years imprisonment, confiscating all illicit funds.
Significance:
Establishes that cryptocurrency can be treated as property for money laundering purposes.
Case 6: Cross-Border Crypto Fraud (Guangxi, 2022)
Facts:
A group defrauded victims in China via a crypto investment platform based overseas. Funds were transferred to foreign wallets.
Legal Outcome:
Chinese procuratorate coordinated with international authorities.
Main suspects were extradited and prosecuted for fraud and illegal fundraising, sentenced to 8–15 years imprisonment.
Significance:
Shows cross-border crypto crimes are subject to Chinese criminal law, especially where victims are in China.
Case 7: NFT Fraud Case (Beijing, 2022)
Facts:
A company sold NFTs promising guaranteed returns, defrauding investors of RMB 20 million.
Legal Outcome:
Prosecuted for fraud (Art. 266).
Court emphasized that virtual assets can constitute property under Chinese Criminal Law.
Sentences ranged 5–7 years imprisonment.
Significance:
Shows the legal extension to emerging crypto assets like NFTs.
IV. Key Takeaways
Legal Status of Cryptocurrency:
Not legal tender; acts involving it can constitute fraud, illegal fundraising, or unlicensed financial operations.
Types of Crimes:
Fraud, pyramid schemes, illegal fundraising, money laundering, and illegal financial operations.
Criminal Law Application:
Cryptocurrency is treated as property, allowing prosecution under traditional financial crime laws.
Severe Penalties:
Offenders face 5–15 years imprisonment, fines, and confiscation of illegal gains.
Trend:
Chinese authorities strictly enforce criminal law in crypto cases, including cross-border schemes and emerging digital assets like NFTs.
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