Attorney Shao Shiwei | People's Court Daily Publishes Article "Criminal Characterization of Illegally Stealing Virtual Currencies"—Highlighting the Cognitive Limitations of Judicial Authorities Regarding Virtual Currency Crimes

On December 5, 2024, the People's Court Daily published the article "Criminal Characterization of Illegally Stealing Virtual Currencies." The case described in the article is not particularly complex; it simply involves Person A stealing Person B's virtual currency (USDT) and selling it for profit.

However, the analysis by court personnel in the article regarding this case evokes a chilling sensation, revealing an attitude of:"Although I do not understand blockchain or virtual currencies, I believe you should be heavily sentenced!"which causes some discomfort.

Let us discuss two viewpoints presented in the article.

01

Many judgments mistakenly write USDT as "ustd." Whether the theft of another person's virtual currency should be characterized as the crime of theft or the crime of illegally obtaining computer system data has long been a controversial topic, and there is still no clear conclusion in judicial practice. Therefore, this article reiterates old arguments, analyzing which charge should be applied to the defendant in this case. The author believes that the crime of theft should be applied, which is arguably reasonable in itself. However, the basis for the author's conclusion that the crime of theft is constituted gives one a feeling of being completely irrelevant:completely irrelevantas follows:

According to the figure above, the author believes that in this case, virtual currencies possess characteristics such as scarcity and utility:

Scarcity: The total supply of virtual currencies is fixed and not infinitely available;

Utility: This is reflected in the fact that virtual currencies, as specific data codes, must be generated through "mining," and "mining" embodies abstract social labor;

However... the defendant in this case stole USDT (Tether), not Bitcoin.

(1) Is Tether scarce? Is its total supply fixed?

                                                                                                                                                                                  USDT (Tether) is a stablecoin issued by Tether Limited, designed to address the volatility issues of traditional cryptocurrencies. The supply of USDT is adjusted by Tether Company based on market demand; that is, the company decides whether to increase the supply of USDT according to market needs.

Furthermore, Tether Company promises that each unit of USDT is backed by $1 in reserves. Therefore, theoretically, the issuance of additional USDT should correspond to the increase in its USD reserves.

Currently,the price of BTC has exceeded $100,000.Although domestic attitudes toward virtual currency investment remain negative, it must be acknowledged that an increasing number of people are choosing to treat Bitcoin as an investment asset. According to relevant data, USDT ranks first in Bitcoin trading volume. Therefore, an increase in the demand for BTC will also lead to an increase in the supply of USDT.

Thus, the total supply of Tether is not fixed but dynamically changes.

(2) Must Tether be generated through "mining"?

Whether virtual currencies rely on mining depends on the consensus mechanism used, the type of currency (such as stablecoins versus non-stablecoins), and whether decentralized participants (miners) are required to maintain the security and integrity of the network. Proof of Work (PoW) is the most common mining mechanism. Miners compete to solve complex mathematical problems (hash problems) to verify transactions and generate new blocks. This process requires significant computational resources and is typically performed using computer hardware (such as CPUs, GPUs, or ASIC miners). Whenever a miner successfully solves this mathematical problem, they obtain the right to generate a new block and add the transaction information within that block to the blockchain. Miners who complete this task usually receive a certain amount of cryptocurrency as a reward. For example, Bitcoin and Ethereum are virtual currencies that rely on mining.

USDT does not need to be generated or issued through mining because it is not a cryptocurrency produced through Proof of Work (PoW) or other mining mechanisms. As mentioned earlier, USDT is a stablecoin, and its issuance and destruction are controlled by Tether Company.

After arguing that the defendant's actions simultaneously constitute the crime of theft and the crime of illegally obtaining computer system data, the author of the article believes that, according to the principle of punishing the more serious crime in cases of imaginative concurrence, the crime of theft should be applied in this case.

Law is rigorous; a correct conclusion should not be derived from an erroneous reasoning process.

Moreover, the conclusion that such cases constitutethe crime of theft is not necessarily absolutely correct.After all, in a considerable number of cases, presiding judges, either because they do not recognize the value of virtual currencies or simply avoid discussing whether virtual currencies have value, directly characterize the defendant's act of stealing virtual currencies as the crime of illegally obtaining computer information system data.

Yu Haisong, Director of the Criminal Division of the Research Office of the Supreme People's Court, has also stated that "in the absence of clear preceding legal bases, having property attributes does not necessarily mean becoming 'property' in the criminal law sense, and property crimes do not necessarily need to be applied to related behaviors."

The maximum sentence for the crime of theft islife imprisonment,while the maximum sentence for the crime of illegally obtaining computer information system data is7 years.。

Due to the erroneous understanding by judicial personnel regarding the nature of the virtual currencies involved, they reached the conclusion that the defendant should be heavily sentenced,which is truly difficult to convince the public.

In daily work, some clients, due to a lack of understanding of virtual currencies, often equate virtual currencies with Bitcoin when consulting lawyers. For example, below is a description of a question posed by a client consulting Attorney Shao. It was only when the client personally contacted me by phone that I realized there had been a misunderstanding: what was frozen was 126,000 USDT, not Bitcoin.

But if judicial personnel also "mistakenly believe" this, it is truly terrifying. Criminal law, as the most severe legal instrument, directly relates to citizens' freedom, property, and even life. Moreover, even if one does not trade cryptocurrencies or understand blockchain, distinguishing these concepts is something that can be easily learned via a simple online search and is not particularly profound.

This reminds me of a case heard last month in a certain location involving a virtual currency exchange suspected of the crime of operating a casino. During the court questioning phase, the judge repeatedly prevented my colleague and me from questioning the defendant, insisting on asking: "Are your questions relevant to this case?"

As defense attorneys, during the court proceedings, we prepared an extremely detailed list of questions to ask the defendant regarding the facts of the case.The reason isthat the model and gameplay of this case were "globally pioneering" with no precedents. However, to argue whether the model constitutes gambling, it is fundamental to understand the specific gameplay of the platform. Yet, due to the handling personnel's lack of understanding of the platform's model, the relevant questions were not recorded in the transcripts. Therefore, it was necessary for the defense counsel to restore the relevant facts of the case through court questioning. In this way,only on the basis of ascertaining the facts of the case and hearing the defense counsel's opinions can the court fairly convict and sentence the defendant, thereby ensuring that the party accepts the judgment and ceases litigation. Otherwise, even after the first-instance judgment, the defendant will continue to appeal to the second instance and apply for a retrial.

In short, the saying that "this world is just a huge makeshift stage" is indeed correct.