Attorney Shao Shiwei | The September 24 Notice Is Not Law, So on What Basis Do You Claim I Committed a Crime?

Indeed, compared to traditional industries, Web3-related job positions offer higher salary levels; project teams are generally located overseas, so domestic employees recruited are typically engaged in distributed work and are not required to clock in at an office. For workers, this combination of high pay and freedom represents an ideal lifestyle.

However, after entering the Web3 circle, many people become aware of relevant regulations such as the September 4 Announcement and the September 24 Notice, leading them to seriously question whether their work content is legal within China ❓

Therefore, many Web3 practitioners appear to behighly secretive; while they navigate the Web3 space rapidly online, they remain tight-lipped about their professions in public offline settings.

Some Web3 practitioners choose to consult lawyers directly, asking whether their work carries legal risks in China. The image below shows a question recently sent via private message to Attorney Shao by a consultant:

This consultant’s line of thinking represents the views of a significant portion of people. Therefore, today we wish to discuss a question that confuses many:

The September 4 Announcement and the September 24 Notice are not laws / Currently, no relevant laws explicitly stipulate that xx conduct constitutes a crime

So, can my job (e.g., issuing tokens overseas, working for an exchange, DeFi, contract trading signal provision, USDT merchant, etc.)really not be done?

Author | Attorney Shao Shiwei

Individuals with certain research capabilities, when encountering legal issues, will first query relevant legal provisions and criminal cases. After completing their search, they ask lawyers:

In fact, many people in the crypto circle, frequently having their bank cards frozen due to cashing out, feel resentful towards domestic judicial authorities:

Why is virtual currency trading open in the Hong Kong Special Administrative Region of China and in many foreign countries, whereas trading crypto or engaging in related Web3 businesses in mainland China is classified as illegal financial activity?

Why do many criminal cases rely on the September 4 Announcement and the September 24 Notice to determine that parties have committed crimes, even though the law does not explicitly stipulate that such conduct constitutes a crime?

This is actually a misconception. Due to space limitations, today we will only discuss:In Web3 criminal cases, is the basis for convicting parties really just the September 4 Announcement and the September 24 Notice?

We must start with the characteristics of law. One characteristic of law is stability; once enacted and promulgated, it must maintain seriousness and authority and cannot be arbitrarily modified or changed. This results in a noticeable lag in law’s ability to address emerging social issues. During implementation, it often fails to timely reflect rapid social changes and developments. Currently, China’s existing Criminal Law is still the 1997 Criminal Law. Although twelve amendments to the Criminal Law have been issued since then, it is still impossible to comprehensively regulate every emerging industry.

Take the NFT digital collectibles industry as an example. Digital collectibles have emerged in China since 2022, four years ago. Have legal provisions been established? Still no.

However, in the past three years, our team, acting as defense counsel, has handled nearly ten criminal cases involving NFT digital collectibles. Some cases were withdrawn, some resulted in non-prosecution, but others ultimately went to court and resulted in significant sentences.

Therefore, the absence of explicit legal provisions for an industry does not naturally lead to the conclusion that a certain business definitely carries no legal risk.

Does this mean thatin emerging fields like Web3 where there are no legal provisions, public security organs can arbitrarily accuse parties of suspected crimes?Certainly not.

Determining whether conduct constitutes a crime under Criminal Law involvesanalyzing and evaluating based on the constituent elements of specific crimes, rather than simply looking at whether there is an explicit legal provision for a certain act. How should this statement be understood?

Take a previously highly publicizedthe nation’s first criminal case involving the issuance of virtual currencyas an example. Yang Qichao, a post-2000s university student, issued a virtual currency abbreviated as BFF on an overseas public blockchain. The court determined that his withdrawal of liquidity, which caused losses to token traders, constituted fraud, and sentenced him to four years and six months in prison in the first instance.

Many people may question:Does issuing tokens necessarily equate to criminal conduct? Certainly not.

Although the September 4 Announcement in 2017 classified Initial Coin Offerings (ICOs) as illegal financial activities, the announcement did not explicitly classify the act of issuing tokens as a specific crime. Furthermore, the September 4 Announcement is not at the hierarchical level of laws or administrative regulations.

So why was the case of the post-2000s individual issuing tokens and withdrawing liquidity classified as fraud?

Since the judgment in this case was not made public, we can only glean limited insights from public reports. According to the case details reported by The Paper [1] (see image below):

Withdrawing liquidity is a common arbitrage method in virtual currency trading. There are no rule restrictions on a public blockchain regarding “whether one can withdraw” or “how long one must wait before withdrawing.” Therefore, from the perspective of industry rules, Yang’s conduct was not problematic. Unfortunately,he himself stated: “I was just taking back what the ‘big brother’ had taken from me,” which aligned with the subjective intent element of fraud—intent to defraud others of their property. If the victim adds: “I didn’t expect him to withdraw the liquidity pool so quickly,” this aligns with the objective element of fraud—causing the victim to fall into mistaken belief.

Once there is a confession admitted by the party, mounting a defense for innocence becomes extremely difficult.

Therefore, whether evaluating any Web3 project itself or the specific work content of Web3 practitioners, when assessing whether there is legal risk and the magnitude of such risk, we must analyze each case on its own merits.

Many consultants feel fear and anxiety about the uncertainty of their legal risks when consulting lawyers, seeking a definitive result from the lawyer. We understand this mindset, but precisely in difficult situations, we must maintain rationality. We must recognize thatin legal gray areas, the determination between guilt and innocence cannot possibly be black and white.

Web3 practitioners must not adopt an ostrich mentality.

This is a piece of advice from Attorney Shao after handling numerous Web3 criminal cases.

When worrying about whether your work or business carries legal risks and thus consulting a lawyer, you must clearly understandwhat your purpose in consulting the lawyer truly is？

Is itmerely to argue with the lawyer:

The September 24 Notice, etc.are not laws, so how can my conduct carry legal risk?

Why do you say there is risk, when I see no national law prohibiting this?

Since you say this business carries risk, why do I see many people doing it, and they have been doing it for many years without incident?

Or is it to communicate and ask questions with the lawyer to thoroughly understand：

where the boundaries of criminal risk lie for your own conduct?

What is the scope and intensity of crackdowns by Chinese judicial authorities on related conduct?

Although there are no explicit legal provisions, which behaviors carry relatively higher criminal risks in judicial practice?

Thereby deepening your legal understanding of your own conduct and helping you make better-related decisions.

After all, given domestic policy restrictions, certain Web3 businesses in China indeed constitute red lines,such as issuing tokens, business models involving gambling, or pyramid schemes. The purpose of writing this article is not to categorically deny the legality of all Web3 projects, but to illustrate that sometimes related businesses exist in a gray area between guilt and innocence. However, individuals’ risk tolerance varies greatly.

Attorney Shao hopes that consultants, after clearly understanding the corresponding legal risks and boundaries and being able to foresee the worst-case scenario, will make the most correct decision for themselves, thereby avoiding potential regrets and remorse in the future.