Can virtual currency mining machines still be sold domestically?

Recently, I have received many inquiries from partners about similar issues: Is it legal to buy and sell mining machines in my country and sell them to domestic users in the current environment? What are the legal risks? Today, the legal team of Sister Sa will talk to you in detail.

Regarding "mining", the country has completely banned

Before answering the question of whether it is legal to buy and sell mining machines, we should clarify a premise: Is mining legal in our country ?

Under the current background of carbon neutrality in China, the 9.24 Notice ("Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation") clearly defines virtual currency business as illegal financial activities . On the same day of 9.24, the "Notice on Rectifying Virtual Currency "Mining" Activities" issued by the National Development and Reform Commission and other departments also clearly stipulates a comprehensive ban on virtual currency mining . Article 2, paragraph 2 of the notice clearly requires: "Distinguish between virtual currency "mining" and existing projects. It is strictly prohibited to invest in and construct incremental projects, and it is prohibited to develop virtual currency "mining" projects under any name; accelerate the orderly withdrawal of existing projects, and scientifically determine the withdrawal timetable and implementation path in combination with the actual conditions of various places on the premise of ensuring a smooth transition."

It can be seen from the two notices that the logical starting point of regulation is related to carbon neutrality . Virtual currency mining will return to the obsolete industry, with no room for maneuver. As for the situation of selling dog meat under the name of data center, the regulatory authorities have also been clear about it, and pointed directly to the core of the problem, and explicitly prohibited the conduct of virtual currency "mining" activities in the name of data center . At the same time, the notice also reminded local governments not to provide financial and tax support and financial services to "mining" enterprises, and to crack down on "mining" enterprises from the source of funds, which shows the determination of the new regulations.

In addition, we have noticed that the website of the Central Commission for Discipline Inspection and the National Supervisory Commission released a message on November 13 that Xiao Yi, former member of the Party Leadership Group and Vice Chairman of the Jiangxi Provincial Committee of the Chinese People's Political Consultative Conference, was dismissed from public office for serious violations of discipline and law. The notice mentioned: After investigation, Xiao Yi betrayed his original mission, undermined the political principle of "two safeguards", and made serious deviations in implementing the major decisions and arrangements of the Party Central Committee, violated the new development concept, abused his power to introduce and support enterprises to engage in virtual currency "mining" activities that did not meet the requirements of national industrial policies, and illegally borrowed money to carry out projects and construction, causing adverse effects. According to the China Judgment Documents Network, during Xiao Yi's tenure as Secretary of the Fuzhou Municipal Party Committee, the Fuzhou Data Center established by the introduction of enterprises was actually the use of equipment for high-performance computing to obtain virtual currency rewards, which is a high-energy-consuming industry that the state does not encourage.

Based on this, mining has no future in China.

Is it illegal to buy and sell mining machines?

Whether buying and selling mining machines is illegal depends on what kind of mining machines are being bought and sold.

Given that "mining" has been strictly prohibited in China, we believe that buying and selling mining machines with a single purpose and function that can only be used for virtual currency "mining" in China (such as ASIC chip mining machines, which are special integrated circuits and customized chip mining machines, which have only one purpose of mining and can only mine currencies with fixed algorithms, and have no other uses) is illegal. The reason is that such mining machines with a single performance and purpose are usually purchased for only one purpose, namely mining. Mining has been prohibited by law in China, so such mining machine trading can be considered as a direct violation of the "Notice on Rectifying Virtual Currency "Mining" Activities" that "it is prohibited to develop virtual currency "mining" projects under any name."

As for CPU mining machines, which can be used as computers for daily use in addition to mining, we believe that they are essentially powerful computers. Computers are ordinary commodities. As long as they are not used for illegal purposes, the act of buying and selling such computers is not illegal. Just like a knife can be used to kill people, it can also be used to cut vegetables. We cannot ban this daily item just because the knife has the potential to become a murder weapon.

The risks of selling mining machines to mainland users

Based on the current carbon neutrality environment and a series of laws and policies in China, we believe that the sale of mining machines to customers in China may be deemed as illegal by administrative law enforcement agencies, especially customs, and thus face the risk of administrative penalties. At present, domestic e-commerce platforms and second-hand trading platforms have completely removed and blocked mining machines and other similar products. Below we will use several typical administrative penalty cases to explain to you.

(I) Administrative penalty for intentionally declaring other brands of mining machines to evade taxes (Zhenguanjijuezi [2019] No. 0080)

A trading company in Changsha, with the legal representative being Wang. On November 9, 2018, the party, a trading company in Changsha, entrusted driver Zhang to drive a truck and declare a batch of mining machines to the customs in the form of general trade supervision with the No. 534************55 "Import Goods Declaration Form", and entered the country through the Shenzhen Bay Port freight entry lane. After inspection by the customs, 150 Bitmain brand mining machines were declared under the declaration form, but 150 Antminer brand mining machines were actually imported, which was inconsistent with the declaration and was seized. After calculation and verification, the tax evaded was RMB 54,007.

In accordance with Article 86 (3) of the Customs Law of the People's Republic of China (Note: Article 86 (3) means: false declaration to the customs of imported or exported goods, articles or goods in transit, transshipment or through transport), Article 27 of the Administrative Penalty Law of the People's Republic of China and Article 15 (4) of the Regulations on the Implementation of Administrative Penalties by Customs of the People's Republic of China, it is decided to impose the following administrative penalties on the parties: a fine of RMB 27,000.

(II) Administrative penalties for evading inspection and tax evasion by declaring other electronic products (Huangguan Jiyi Juezi [2019] No. 0009)

On November 15, 2018, a supply chain limited liability company in Yongzhou City declared 641 computing servers to the customs under general trade supervision with the declaration form No. 49***********2747, and bound the land import cargo list No. 11*******6245 of the mainland customs and Hong Kong customs. The company entered the country from the Huanggang Port by vehicle. After inspection, the actual imported goods were 641 virtual currency mining machines. The above actions of the company have violated the customs supervision regulations and evaded tax payment of RMB 535,950.

In accordance with Article 15 (4) of the Regulations of the People's Republic of China on the Implementation of Administrative Penalties by Customs, it is decided to impose the following administrative penalties on the parties concerned: a fine of RMB 42,800.

(III) Imported second-hand mining machines were identified as solid waste that is currently prohibited from import in my country and were subject to administrative penalties (Huanggang Jifu (Wei) Decision No. [2019] 0044)

On June 12, 2019, the company in question, holding Declaration Form No. 52************0268, declared to the customs under general trade supervision that it imported 547 used Antminers, weighing 3,660 kilograms, and bundled them with the mainland Customs and Hong Kong Customs land import/exit cargo manifest No. 11*******4960, and entrusted a vehicle to transport them into the country from the Huanggang Port. After inspection by the customs, the quantity and weight of the imported goods declared in the form were consistent with the actual number, totaling 547 units, weighing 3,660 kilograms. After inspection by the Shenzhen Customs Industrial Products Testing and Technology Center, the above-mentioned goods involved in the case were found to be solid wastes currently prohibited from import into my country (identification report: 54************5340).

I made a proposed penalty decision on July 31, 2019, and notified the party concerned on August 23, 2019. The party concerned was dissatisfied and filed a defense. It has now been reviewed.

In accordance with the provisions of Article 78, paragraph 1 of the "Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste", it is decided to impose the following administrative penalties on the parties: a fine of RMB 120,000.

Based on the three typical administrative penalty cases, we can see that the act of selling mining machines to users in mainland China is not expressly prohibited by law, provided that (1) the mining machines are truthfully declared and taxed in accordance with the law, and (2) the mining machines are imported in accordance with the law to avoid being identified as hazardous wastes prohibited from being transferred through the territory of the People's Republic of China under Article 78 of the Law on the Prevention and Control of Environmental Pollution by Solid Wastes, and as solid wastes prohibited by the Basel Convention and its Additional Protocols.

Final Thoughts

We believe that it is not appropriate to regulate the buying and selling of mining machines with criminal law . Criminal law regulation should follow the most basic principle of legality of crime and punishment, and acts that are not explicitly defined as crimes cannot be considered crimes.

As mentioned above, the sale and purchase of mining machines that can only be used for virtual currency mining may constitute an administrative violation. However, the sale and purchase of mining machines that have both mining and other functions requires specific analysis of specific issues, and it is not appropriate to view this issue from a "one-size-fits-all" perspective.

This is just my personal opinion. Unless the buying and selling of mining machines causes extremely serious harm to society, causes major losses to public and private property, or has other extremely serious circumstances, it is not appropriate to evaluate the simple act of buying and selling mining machines as a crime.