Will trading cryptocurrencies get you arrested? Shanghai Second Intermediate Court clarifies: Personal arbitrage is not considered illegal business.

Shanghai Second Intermediate Court hosts a seminar on virtual currency crimes, clarifying that “individual trading of coins generally does not constitute the crime of illegal business.” Li Mou bought low and sold high, earning tens of millions; the court recognizes that personal arbitrage is not illegal. But the red line: helping others to illegally exchange foreign currency or providing exchange services to clients for a fee, constitutes underground banking and criminal liability. The key point in judgment: whether the activity is continuously provided as a business to unspecified targets.

The core boundary between personal coin trading and illegal business

Through analysis of typical cases, the seminar clarifies the core boundary between criminal and non-criminal conduct. In the case, Li Mou profited from buying low and selling high on domestic and foreign platforms, earning tens of millions in price differences. The court believes that if such behavior is solely personal arbitrage and does not target the public with a business purpose, it does not constitute the crime of illegal business. This determination emphasizes that establishing the crime of illegal business requires strict adherence to the “business activity” characteristics, considering whether the activity is profit-driven, whether it is continuously provided to unspecified targets, and other key factors.

This case is highly instructive. For a long time, China’s legal status of virtual currencies has been ambiguous, leading to significant differences in judicial practice regarding the characterization of coin trading activities. Some courts classify large arbitrage as illegal business; others consider it a civil matter. The Shanghai Second Intermediate Court’s conclusion first clearly defines the standard: the key is not the amount but whether it constitutes “business.”

Features of personal arbitrage include: using own funds, bearing risks personally, not providing services to others, and not charging fees. Even if Li Mou earned tens of millions in profit, as long as he is trading with his own money across different platforms for profit, this behavior is essentially no different from stock investors arbitraging among different brokers and should not be criminalized. This judicial prudence protects individual investment freedom and avoids excessive interference in normal economic activities.

However, this does not mean all coin trading activities are safe. If an individual’s trading involves helping others launder money, evade foreign exchange controls, or commit other upstream crimes, they may still be held as accomplices. The precise judicial definition of virtual currency-related conduct sets boundaries for market participants and promotes legal uniformity in virtual currency cases.

The boundary between criminal and non-criminal coin trading behavior

Legal personal arbitrage: using own funds, buying low and selling high on different platforms, bearing risks, not providing services to others

Illegal underground banking: providing foreign exchange services to unspecified clients, charging fees, and engaging in continuous operation

Accomplice conduct: knowing that others are illegally trading foreign exchange but still providing help through virtual currency exchange

Key judgment: whether the activity is profit-oriented and whether it continuously provides services to unspecified targets

Where is the red line for underground banking in criminal law?

The seminar also delineated legal red lines: if one knowingly assists others in illegal foreign exchange trading by providing virtual currency exchange, and the circumstances are serious, they will be recognized as accomplices of illegal business. Using virtual currency as a medium to provide exchange services to unspecified clients and charging fees is essentially illegal “underground banking,” and criminal liability will be pursued according to law.

Typical features of underground banking include: establishing fixed locations or online platforms, advertising exchange services publicly, charging a fixed percentage fee, and continuously serving multiple unspecified individuals. Such conduct fundamentally involves unlicensed financial operations, severely disrupting foreign exchange management order. The main difference from personal arbitrage is that underground banking is “external business” rather than “personal investment.”

Common underground banking models in cases include: posting ads on social media for “USDT to RMB” exchanges, promising favorable rates, charging 1-3% fees, and handling hundreds of transactions monthly. Once identified as underground banking, sentencing usually exceeds 5 years; in particularly serious cases, life imprisonment is possible. Cases involving amounts over tens of millions are generally deemed serious.

Determining accomplice liability is more complex. If one knowingly assists others in illegal foreign exchange transactions through virtual currency exchange, even without charging a fee, they may still be considered an accomplice. The key is proving “knowing” — often through chat records, transaction frequency, and fund scale. If someone only occasionally helps friends exchange currency without knowing about illegal activities, it usually does not constitute a crime.

Judicial prudence and investor risk assumption

This conclusion reflects judicial prudence: it avoids excessive criminal intervention in normal personal investment arbitrage while precisely cracking down on illegal activities that disrupt financial order through virtual currencies. It should be noted that virtual currencies do not have legal tender status, and related transactions carry civil risks; investors must bear the trading losses themselves.

This reminder is very important. Although personal coin trading does not constitute a crime, it does not mean legal protection. If one is scammed or the platform defaults, reporting to police may result in no case being filed due to the lack of legal tender status. This “criminal non-intervention, civil self-responsibility” situation puts virtual currency investors in a legal gray area.

Practically, personal coin trading should pay attention to three points: first, only use own funds, avoid managing others’ funds or raising capital for trading, to prevent being deemed as illegal business. Second, do not provide exchange services; even if friends ask, refuse to avoid involvement in underground banking cases. Third, keep transaction records to prove the source of funds are legal; in case of investigation, these can demonstrate no money laundering or other criminal proceeds.

From a policy perspective, the Shanghai Second Intermediate Court’s conclusion reflects China’s delicate balance in virtual currency regulation. On one hand, cracking down on illegal financial activities involving virtual currencies; on the other, not criminalizing individual investment behaviors. This “combating crime while protecting investment” approach provides guidance for future virtual currency regulation policies.

Overall, the Shanghai Second Intermediate Court’s conclusion sets a clear legal boundary for coin trading activities. Personal holding and arbitrage do not constitute the crime of illegal business, but providing exchange services and assisting in foreign exchange crimes violate criminal law. Investors should operate within legal boundaries and recognize that the civil risks of virtual currency trading are self-resigned.