Can Chinese law regulate overseas cryptocurrency-related crimes?

This article is from the public account Xiaoza lawyer, author: Xiaoza.

In the face of a potential regulatory storm, some virtual currency institutions operating on the edge of criminal law have begun to consider transferring relevant businesses overseas, believing that as long as their operations are away from mainland China and key personnel hold a foreign green card, they can evade Chinese legal supervision, and even think that even if they are suspected of committing a crime, Chinese criminal law is merely "out of reach."

Indeed, blockchain disputes and crimes pose challenges to both traditional civil jurisdiction and criminal jurisdiction in China due to their hidden, sudden, and cross-regional characteristics. However, this does not mean that institutions can rest easy by moving their businesses overseas, especially when their relevant activities are suspected of being criminal.

1. Four Major Jurisdiction Principles

Jurisdiction is a symbol of a country's sovereignty, designed from the outset to be as comprehensive and proactive as possible. China's criminal law stipulates four principles of jurisdiction in Articles 6 to 9: territorial jurisdiction, personal jurisdiction, protective jurisdiction, and universal jurisdiction. Territorial jurisdiction examines the "place of crime"; as long as the place of crime is in China, Chinese public security and judicial authorities can exercise jurisdiction. Personal jurisdiction examines the identity of the suspect; as long as the suspect is a Chinese citizen, they should be subject to jurisdiction even if the crime occurs outside the territory. Protective jurisdiction considers the impact of foreign crimes on China's legal interests; if a suspect commits a crime against China or Chinese citizens abroad, and the crime is punishable by more than three years in prison, and it also constitutes a crime at the place of crime, Chinese criminal law can also exercise jurisdiction. Universal jurisdiction involves countries working together to combat certain internationally recognized crimes, specifically those defined by international treaties that China has signed or participated in, even if the criminal process itself has no direct connection to China, Chinese public security and judicial authorities can still exercise jurisdiction.

2. Territorial Jurisdiction: An Inescapable Constraint

So, if an institution conducts business in a place where all virtual currency activities are legal, and the actual controller holds a foreign identity, can they definitely escape the jurisdiction of Chinese criminal law? The facts are not so simple; if the relevant business touches upon Chinese criminal law, then based on the broad interpretation of "place of crime," Chinese criminal law can also regulate it according to territorial jurisdiction.

What is the "place of crime"? According to Article 6 of the Criminal Law and Article 2, Paragraph 1 of the Interpretation of the Criminal Procedure Law, the place of crime includes both the place where the criminal act occurs and the place where the criminal result occurs.

It is particularly important to note that blockchain and virtual currency-related businesses are often conducted through computer networks. Article 2, Paragraph 2 of the Interpretation of the Criminal Procedure Law expands the concept of "place of crime" for crimes primarily committed using computer networks, including the location of the servers used for the criminal acts, the location of the network service provider, the location of the information network system that was harmed and its administrator, the location of the information network system used by the defendant and the victim during the crime, as well as the location where the victim was harmed and the location where the victim's property suffered loss. It can be seen that even if the subject and business of the institution are transferred abroad, as long as there are Chinese individuals involved and their property suffers loss, China can still be considered the "location of the information network system used by the victim," "location where the victim was harmed," or "location where the victim's property suffered loss," and Chinese public security and judicial authorities can still exercise jurisdiction over the criminal acts of the institution.

For a similar example, if a foreigner opens an offline casino in a country where gambling is legal, even if Chinese citizens go there to play, Chinese criminal law cannot exercise jurisdiction based on the principle of territorial jurisdiction (not the place of crime) or protective jurisdiction (legal in that location). However, if he opens an online casino and the audience includes Chinese citizens, then relying on the internet, relevant locations within China can also become the "place of crime," and Chinese criminal law can directly regulate it based on the principle of territorial jurisdiction. Of course, how to bring the case to justice will also depend on the specific circumstances of international criminal judicial assistance, whether it can truly convict and punish, and whether the suspect is aware that the audience includes Chinese citizens, etc., which will not be elaborated on in this article.

3. "The Happy Trouble"

In fact, including crimes related to blockchain businesses, the "connection points" for crimes committed using computer networks in China's criminal jurisdiction are not too few, but "too many," especially in cases involving illegal fundraising, where there often appears a large number of "locations where the victim was harmed," "locations of the information network system used by the victim," or "locations where the victim's property suffered loss." This can easily lead to jurisdictional conflicts in practice, where either various public security and judicial authorities compete to exercise jurisdiction, or they push back against each other and refuse to take jurisdiction. In this regard, we believe that the "designated jurisdiction" system should be fully utilized; in cases of jurisdictional conflicts, timely reporting should be made for communication and determination of jurisdiction by higher public security and judicial authorities. Alternatively, certain locations could be established as priority jurisdictions, such as "actual harm locations," to improve judicial efficiency and fairly and justly resolve jurisdictional conflicts in blockchain crime cases. This concludes today's sharing; thank you to the readers!