Run, clear the sea? This question for the exchange is too difficult

Text | Qin Xiaofeng

Production | Odaily Planet Daily

The market turned cold, and the exchange changed from a once enviable business to a hot potato.

Beginning in September, some small exchanges that did not have risk control capabilities, had previously demolished the East Wall, made up the West Wall, and planted severe thunderstorm risks, have successively announced the closure or run their way, such as GGBTC, Huiyuan.

In October, regulations tightened and another large number of exchanges closed down. Some people in the industry expect that "MLM coins and pheasant exchanges are" dead "before the market can rise."

In order to avoid risks, some exchanges take the initiative to liquidate user assets, remove MLM coins, cancel domestic entities, or block Chinese IP. It is reminiscent of P2P companies that have "self-purified" before.

However, lawyers point out that although the above-mentioned behavior can avoid the risk of fund-raising fraud to a certain extent, it does not guarantee full immunity.

The market is so cold and unsustainable, how to "benign exit" if you don't run? This is a fatal question that the exchange is facing.

In this article, Odaily Planet Daily will detail the exchange's exit posture and, in conjunction with the director of the Bank of China Law Research Association and Xiao Dao, a practicing lawyer at Beijing Dacheng Law Firm, will comprehensively present the legal risks that different exchanges may take.

Odaily Planet Daily also reminds investors to be alert to scams and leave the market as early as possible from high-risk assets.

Benign retreat vs fancy running,

"I took your money away for financial management"?

On December 25, an exchange called Bitgogo added a touch of "humor" to Christmas.

In the afternoon of the same day, the Bitgogo Exchange issued an announcement stating that some users' digital assets (including BTC, ETH, EOS, LTC, BCH, BSV, ETC, and USDT) will be temporarily frozen based on 20% annualized income. Will unlock frozen assets and redeem financial income.

The announcement of "mandatory financial management" has raised concerns about the capital status of the exchange. In the past two years, many P2P companies have experienced a payment crisis due to a break in the capital chain, and eventually closed down. Investors worry that exchanges will repeat the same mistakes.

This worry is not groundless. BitUniverse and PeckShield, while tracking the assets of the Bitgogo Exchange, found that the exchange ’s wallet assets have shrunk from a maximum of $ 350,000 in September this year to less than $ 20,000 in assets on the current account.

As of press time, Bitgogo has deleted this announcement. Although the website has not been shut down, there are various signs that it is experiencing cash payment problems.

Bitgogo is not alone. Many trading platforms including GGBTC, Btbull, TRSU, Newton, IDAX, etc., have also been exposed to problems such as difficulty in withdrawing coins.

"Going in, not going out, both GGBTC and Bitgogo are rampant." Investors said.

There are also many investors who call this kind of situation a "soft run," which gives investors hope, but the funds are indeed swept away.

Odaily Planet Daily's inquiry found that since September this year, more than 20 exchanges have encountered difficulty in withdrawing coins, went bankrupt or closed down, or ran straight.

Direct runners, such as ALLCOIN,, Ctcoin, etc., did not announce any announcements, because users were unable to trade withdrawals and customer service was lost, and they were officially declared dead.

For other relatively “exquisite” exchanges, they are decently announcing the closure, and the user assets are liquidated for a limited time:

  • On September 29, issued an announcement saying that the deposit of all currencies should be stopped and users must complete the withdrawal within 20 days;
  • On October 1, Kikcoin announced that due to the break in the capital chain, and let users complete the withdrawal of coins before the shutdown on November 3;
  • On December 24, Biger Exchange announced an orderly benign withdrawal, and the platform will stop digital currency trading and withdrawal services on December 27.

…… As the exchanges are busy running and "benign retreat", some trading platforms are "going overseas". The typical operations are: cancel domestic entities, block Chinese IP transactions.

The company's investigation data showed that on November 26, 2019, the company principal of the CoinTiger Exchange, Chengdu Taiyi Technology Co., Ltd., due to a resolution to dissolve, proposed to apply to the company registration authority for cancellation of registration. Later, CoinTiger responded that its registered place was in Singapore, and the cancellation of the domestic entity's normal operations only in response to the regulatory policies in mainland China.

In addition, the Odaily Planet Daily query found that many trading platforms including matcha, Btuex, IDAX, GGBTC, QBTC, etc., have issued announcements announcing that they will stop providing services to users in mainland China and offline some of the previously controversial MLM currency.  

The cold winter of the currency circle can be seen from the movement of the exchange. Regarding the current situation, the choices of the exchanges are different, which also determines their future destiny.

Is it safe to clear the exchange?

Whether it is the voluntary liquidation of assets or the pursuit of going overseas, the fundamental purpose of the exchange is to avoid legal risks. However, things are not as simple as they think.

Xiao Ye, a member of the Bank of China Law Research Association and a practicing lawyer at Beijing Dacheng Law Firm, analyzed the legal risks that different exchange behaviors may take from the perspective of a legal practitioner to the Odaily Planet Daily.

  • Regarding direct-run exchanges, Xiao Zheng said that he needs to bear civil legal liabilities, including compensation for victims or infringers, as well as criminal legal liabilities.

"On the criminal level, the Runway Exchange is suspected of financial fraud. If there is illegal fundraising for fraudulent purposes, it will be suspected of fundraising fraud. The act of" Runway "itself indicates that it is for illegal possession. ', That is, the legal risk of this type of behavior is greater. When the conditions permit, the victim can bring a criminal incidental civil lawsuit or another civil lawsuit to claim relevant compensation. "Xiao Yan explained.

The Odaily Planet Daily reminds readers that if such an event occurs, investors are advised to report to the location as soon as possible and submit relevant materials in accordance with police requirements. The sooner you call the police, the more likely you are to recover your losses.

  • For those who seize users ’assets for“ financial management ”or freeze their withdrawals, Xiao said:“ During a legal exchange transaction, the legal relationship between the user and the exchange is a contractual relationship. If the user ’s assets are forcibly frozen, the exchange changes the user. If the funds are used or there are other acts that violate the contract, the user has the right to sue. "
  • Regarding exchanges that take the initiative to liquidate user assets, Xiao Zheng believes that at the legal level, the risk of fundraising fraud can be avoided to a certain extent, but it cannot guarantee all exemptions.
She explained:
"The" Regulations on the Management of Blockchain Information Services "stipulates that, when engaging in blockchain information services within the territory of the People's Republic of China, it is necessary to perform record filing procedures. That is, the domestic exchange model in China has been banned. The exchanges operating in China are suspected of illegal operations. In the transaction, if there is an act of absorbing public funds, it will also be suspected of illegal fund raising. "
  • For exchanges that cancelled their domestic entities and announced that they no longer serve Chinese users, Xiao Zheng said that it does not mean that they can be completely exempted.

"The principle of jurisdiction in China's criminal law adheres to the principle of personal jurisdiction, territorial jurisdiction, and protection jurisdiction. Among them, territorial jurisdiction means that anyone who commits a crime in the territory of the People's Republic of China applies this law unless it is specifically provided A crime or result that occurs in the territory of the People ’s Republic of China is considered to be a crime in the territory of the People ’s Republic of China. The principle of personal jurisdiction states that “Citizens of the People ’s Republic of China who violate the provisions of this Law outside the territory of the People ’s Republic of China This law applies to this law, but the maximum sentence provided for in this law is a term of imprisonment of less than three years, which may not be prosecuted. That is, the conduct of illegal business operations outside the Chinese domain or the result of the criminal behavior occurred in our country. People will also be evaluated by our law. "Xiao Yan explained.

In simple terms, those who actually conduct exchange operation propaganda in China, or Chinese who engage in exchange operation abroad, are not completely exempt.

Exchange's "gathering failure" early failure

The first wave of "super-birth" on the exchange began with the "Thousand Wars" in mid-2018.

At that time, Fcoin launched "Trading is Mining", which has become the number one exchange in the world, making many people jealous. Overnight, hundreds of trading platforms emerged, following the Fcoin.

However, as the market turned cold, especially with Bitcoin dropping to more than $ 3,000 in December last year, more than 90% of exchanges declared their deaths. Many people who have been friends with the exchange have already changed careers.

This year, with the recovery of bitcoin price, up to nearly 14,000 US dollars, the emergence of new games such as IEO and model currency, the exchange has once again emerged intensively.

Behind this is the "help" of technology providers. Their fees range from hundreds of thousands to millions, and they all claim to help users set up an exchange system in a very short period of time (from several days to a week).

It's just that there are dishes but no diners.

The head effect of the currency circle is prominent, with 80% of the traffic concentrated on the top 20 head exchanges, while the remaining thousands of small exchanges can only divide up 20% of the market. The second- and third-tier exchanges are still struggling with the food and clothing line. Smaller exchanges are no longer enough to make ends meet. In particular, the market decline in the second half of this year has further increased the pressure on the exchange to survive, and bankruptcies and bankruptcies have occurred from time to time.

From a policy perspective, starting in October, supervisory agencies, including the central bank's Shanghai headquarters and the Shenzhen Stock Exchange Mutual Fund Office, have successively issued risk warnings on preventing "virtual currency" illegal activities. On December 25, Qiu Yitong, the director of the Guangzhou Financial Bureau, stated that all virtual currency platforms in Guangzhou had withdrawn from the market normally.

In addition, Alipay and WeChat cracked down on virtual currency exchange from the payment side, which also compressed the living space of the exchange and further promoted the collapse of the exchange.

Anonymous sources said that stricter regulations are actually good for the entire industry.

"Some small exchanges are called incubation for the sake of revenue. In fact, they have saved a lot of MLM bureaus on the one hand, which has caused investors heavy losses, and on the other hand has also emptied the stock of the market. Nowadays, the onset of regulation has affected Investors can just play a very good protection role. From another level, only when MLM coins and pheasant exchanges are 'dead' can the industry get better. "


Today, in addition to the above-mentioned fancy exits, there are also some small exchanges that are still "struggling to death", expecting the market to recover before halving, but also frankly cannot see the way out.

"BISS was very sorry about the incident. Why did you do an exchange. Now this market is for entertaining and self-sufficient. Whether you can insist on halving next year is not necessarily."

For practitioners of exchanges that are still operating, lawyer Xiao Min reminded:

"The domestic exchange model in China has been banned. Those who operate exchanges in the country will be suspected of engaging in criminal risks such as illegally absorbing public deposits, raising funds and fraud; if they invest and operate overseas, operators may be subject to market bans and Risks such as fines, as well as civil tort and breach of contract litigation risks of operating exchanges are also inevitable. "

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