Schrodinger's USDT is not in my crypto wallet, is it?

With the further maturity of the application of blockchain technology, the application of virtual assets such as cryptocurrencies and NFT digital collections has also been further expanded, and various industries in the upstream, middle and downstream regions have seized the capital for future development at the wind of the times. At present, the encrypted wallet has become one of the most important links in blockchain applications, Web3 and the meta universeEncrypted asset storage, authentication, payment collection, and online application loginAnd many other vital functions, and even many wallets support various DeFi projects and fund custody projectsThe importance of encrypted wallet for each user is self-evident

So, as such an important anchor point in the meta universe and the Web3 world, encrypted wallets are generally lack of supervision at present, and the security of various online wallets is also questioned under the true and false attacks of hackersIs it possible for the staff of the wallet operator to directly use the virtual assets stored by the user for DeFi project investment, mortgage, pledge or even disposal without the user's informed consent to constitute a crime?Compared with traditional financial institutions, will the charges be different? Today we will focus on the virtual asset wallet and explore the criminal red line.

Is the virtual currency in the encrypted wallet a deposit?

To solve this problem, we should first make clear two prerequisites: (1)Is the encrypted wallet a bank? Can I operate savings business?(2)Is the virtual asset a deposit?

as everyone knows,China has implemented strict control policies in the financial field for a long time, and a series of administrative permits and financial licenses are required to enter the financial fieldIn other words, if all financial institutions in China want to legally develop their business, they need to be licensed. The scope of business development depends on the scope of business permitted by the license. Some non licensed financial institutions or similar financial institutions, such as cross-border brokers, P2P, have gone back to the era of gold digging in China. According to Article 11 of China's Commercial Bank Law, the establishment of a commercial bank shall be examined and approved by the banking regulatory authority under the State Council. Without the approval of the banking regulatory authority under the State Council, no unit or individual may engage in commercial banking businesses such as absorbing public deposits, and no unit may use the word "bank" in its name.

Therefore, if you want to legally operate savings and credit businesses and absorb deposits for the unspecified public, you must obtain the administrative license of the CBRC and the bank license. The unlicensed institution promises to the unspecified public to absorb deposits at high interest rates without authorization, which is likely to constitute the crime of illegal absorption of public deposits as stipulated in Article 176 of the Criminal Law. As far as Sajie's team knows, no crypto wallet operator has yet obtained a bank license, that is,At present, the operators of crypto wallet machines on the market are not banks, and they cannot operate savings, credit and other financial businesses in China

So, does virtual asset belong to deposit? Academics generally believe that deposit refers to the capital or currency that depositors temporarily transfer or deposit in banks or other financial institutions, or temporarily transfer the right of use to banks or other financial institutions, under the condition of retaining ownership. Savings business is the most basic and important financial behavior or activity of banks, and also the most basic source of credit funds for banks. Is virtual asset a currency? Can you bear the deposit function? According to the Notice on Preventing Bitcoin Risks (YF [2013] No. 289) issued by the People's Bank of China in 2013,The central bank has made it clear that Bitcoin is not legal tender, but a specific virtual commodity, and does not have the same legal status as currencyAnd prohibit financial institutions and payment institutions from conducting bitcoin related businesses. By analogy,Current virtual assets, including NFT digital collections, are not currencyIt is a special virtual commodity with value, and naturally it cannot bear the function of deposit as currency. However, virtual assets are not deposits, which does not represent illegal fund-raising activities involving virtual assets, and cannot constitute illegal fund-raising crimes.

The cryptowallet operator misappropriates it without the user's informed consent

Does capital investment constitute a crime?

In the traditional financial industry, bank employees, without the informed consent of users, misappropriate the funds in user accounts for investment, lending, and even for personal spending and absconding with funds. There are many cases related to the crime of misappropriation of funds and the crime of job embezzlement on the judicial document website. We can't help but ask questions, even in the traditional financial industry with such strict supervision, All kinds of criminal crimes against users' funds are still being banned repeatedly. Will the situation be worse in the crypto world where the regulatory tentacles have not yet been fully touched?What is the crime if the cryptowallet operator steals the user's funds or arbitrarily misappropriates the funds stored in them?

(1) Crime of misappropriating funds

According to the provisions of Article 272 of the Criminal Law, the crime of misappropriation of funds refers to the behavior of a staff member of a company, enterprise or other unit who, taking advantage of his position, misappropriates the funds of his own unit for personal use or loans them to others in a relatively large amount, which has not been returned for more than three months, or, although not more than three months, which is relatively large in amount, conducts profit-making activities, or conducts illegal activities.

In other words, if the perpetrator meets the following conditions, the crime can be constituted:

(1)Took advantage of his position(For example, conditions formed due to job duties such as self management and handling of company funds);

(2)Misappropriation of unit funds without legal approval

(3) Give the misappropriated funds to individuals or lend them to others;

(4) Those who have a relatively large amount and have not paid it back for more than three months, or those who have engaged in profit-making activities in a relatively large amount and have not paid it back for more than three months, or those who have engaged in illegal activities.

Then, if the senior executives or staff of the cryptowallet operator misappropriate the user's virtual assets, does it constitute this crime? Sister Sa's team believes that,In practice, it is possible to evaluate the above behaviors with this crime. Of course, there is a great controversy in the theoretical circle.It is generally believed that for the crime of misappropriation of funds stipulated in the Criminal Law, the actor's need for misappropriation is "funds" in a narrow sense, in other words, it is RMB or other types of legal tender, but not objects or other valuable virtual commodities. According to the Notice on Preventing Bitcoin Risks issued by several departments such as the Central Bank in 2013, digital collections are not legal tender and do not have the function of legal tender.

However, in judicial practice, we should also see that,This general idea is being broken by realityIn a case of illegal absorption of public deposits in Zhejiang in 2020 [(2020) Zhe 0329 Xing Chu No. 136], the act of absorbing virtual currency implemented by the actor was first recognized by the court as the crime of illegal absorption of public deposits, and cryptocurrency was first recognized as "capital" in judicial practice.

In fact, it is controversial whether "funds" can only be interpreted as legal tender. In 1995, private financing and lending had risen, diverting a large number of user deposits from banks. In order to protect the monopoly of commercial banks in absorbing deposits, the National People's Congress issued the Decision on Punishing Crimes of Disrupting the Financial Order, which newly established the crime of illegally absorbing public deposits in Article 7. In 1998, various illegal fund-raising activities emerged one after another in China. Therefore, the State Council issued the Measures for the Suppression of Illegal Financial Institutions and Illegal Financial Business Activities, which listed "illegal absorption of public deposits" as "illegal financial business activities", That is, "without the approval of the People's Bank of China, the activities of absorbing funds from unspecified objects of society, issuing vouchers, and promising to repay the principal and interest within a certain period of time."Since then, the object of the crime of illegally absorbing public deposits has changed from "deposits" to "funds"

In order to limit the expansion explanation from deposit to capital, scholars often make articles on the definition of "deposit" and put forward "credit fund theory", "potential deposit theory", "demand deposit theory", etc.From the perspective of scholars, virtual assets cannot become a part of China's banking business at this stage, so they cannot be interpreted as "capital"Thus, it becomes the object of crimes such as illegal absorption of public deposits and misappropriation of funds. However, the views of scholars cannot replace the judgments of judges in practice, and can only affect the legislative orientation to a certain extent.

On February 24, 2022, the Supreme People's Court issued the Decision on Amending the Interpretation of the Supreme People's Court on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fund Raising, which revised Item 8 of Article 2 as: "Illegal absorption of funds through online lending, investment into shares, virtual currency transactions, etc."Since then, the illegal fund-raising behavior of absorbing funds in disguised form by absorbing virtual currency has officially become the target of illegal fund-raising crimes。 Although there is no normative document specifically defining "funds" in the crime of misappropriation of funds, Sa Jie's team believes thatAs long as the virtual currency conforms to the relevant characteristics of capital, it may be recognized as capital by judges in practice.

(2) Duty encroachment

According to the provisions of Article 271 of the Criminal Law, the crime of duty embezzlement refers to the behavior of the staff of a company, enterprise or other unit who, by taking advantage of their positions, illegally take possession of the property of their own unit, with a relatively large amount.Compared with the crime of misappropriation of funds, the crime of duty embezzlement has similarities and significant differences

First, the crimeBroader definition of "unit", and in terms of ownership attributes, they do not ask, including both state-owned units, collective units, and private units (of course, one-man company is controversial in the academic community whether it can constitute this crime). Secondly, the actor is also required toTake advantage of his positionAnd illegally take possession of the property of a large unit. Both the general theory of criminal law and judicial practice believe that the crime of duty embezzlement includes the acts of stealing, defrauding, and occupying the property of the unit by taking advantage of the convenience of the position and other acts of occupying the property of the unit.

There are two major differences between this crime and the crime of misappropriating funds: (1) The actor must havePurpose of illegal possession, take possession of the property obtained by taking advantage of his position and refuse to return it; (2) The property occupied by the actor can be either capital orOther valuables。 Therefore, Sajie's team believes that when crypto wallet executives or other staff use their positions to embezzle users' virtual assets, they can constitute the crime of job embezzlement. Of course, this crime also requires a certain amount. According to the provisions of the Supreme Law and the Interpretation of Several Issues Concerning the Application of Laws in Handling Criminal Cases of Corruption and Bribery (hereinafter referred to as the Interpretation of Corruption and Bribery Cases) issued by the Supreme People's Procuratorate in April 2016, if the amount of assets misappropriated by senior executives or other staff members of the cryptowallet operator is large, it may constitute the crime of job embezzlement.

Write at the end

Compared with a few years ago, after a long period of judicial practice, although there is no authoritative general theory on the legal nature of various virtual assets, there are also many theories (such as the theory of powerlessness, the theory of proof of rights, the theory of binding rights, etc.) and precedents for reference. In the current environment where the virtual asset circle is cold, the macroeconomic situation is not clear, and a large number of customer complaints continue to occur on various platforms,Not only traditional virtual currency exchanges and NFT trading platforms need to strictly control red line risk, but also various Web3 enterprises closely related to virtual property, such as crypto wallets, need to be vigilantOnly by complying with regulations can we achieve stability and prosperity.