Encryption Industry Survey: Hangzhou Incident Sparks Follow

Recently, the news that practitioners in the encryption industry in the Hangzhou area have been asked to cooperate with local police investigations has attracted widespread attention. It is reported that since June 8, the Hangzhou police have started investigating encryption practitioners within their jurisdiction. This action has sparked discussions about the legal risks of the domestic encryption industry.

Key Subjects of the Survey

According to online information, this survey mainly targets the following groups:

1. Personnel who have participated in token issuance or project financing.
2. Companies or individuals with overseas fundraising, financing repatriation, cross-border transfers, or USDT OTC trading records.
3. Personnel engaged in community operations or with a background in user acquisition, such as opinion leaders, decentralized autonomous organization managers, node operators, etc.

Some analyses suggest that Hangzhou becoming the first city to conduct a large-scale investigation into the domestic encryption industry may be related to the local police's technological advantages in the blockchain field, abundant web3 talent resources, and active cross-border virtual currency trading.

Interpretation from a Legal Perspective

From the perspective of legal professionals, there is currently insufficient evidence to suggest that mainland China will further intensify its crackdown on the encryption industry based on the "9.24 notice". If the investigation in Hangzhou is true, there may be several reasons for this:

1. There may be large encryption teams involved in criminal cases in the region, leading the police to conduct investigations and inspections across the entire industry.
2. Based on the relevant clues from financial regulatory authorities, the public security department is investigating encryption practitioners within its jurisdiction to prepare for future financial regulation.
3. For tax purposes, establish a basis for the potential taxation of encryption assets in the future.

It is important to note that citizens' private property is protected by law and may not be searched or seized without legal procedures. If the police need to perform technical recovery of data from personal computers, they must follow the corresponding legal procedures.

The Current Status and Outlook of the Domestic Encryption Industry

Since the "9.24 notice" jointly issued by multiple ministries and commissions in September 2021, China has implemented strict bans on activities related to virtual currency. This includes prohibiting the exchange of virtual currency with fiat currency, the exchange between virtual currencies, the buying and selling of virtual currency as a central counterparty, providing information intermediation and pricing for virtual currency transactions, token issuance financing, and trading of virtual currency derivatives.

However, the "9.24 notice" also mentioned that the losses incurred by individuals investing in virtual currencies and related derivatives are to be borne by the investors themselves. This provision is interpreted by some legal practitioners as: China does not prohibit virtual currency investment, but also does not provide protection.

Nevertheless, in reality, many people still face legal risks due to trading virtual currencies. Therefore, to avoid potential legal issues, some legal experts advise mainland citizens to exercise caution when dealing with virtual currency transactions.

Conclusion

Currently, the regulatory attitudes towards cryptocurrencies vary globally. Regions such as Singapore, mainland China, Hong Kong, and the United States are tightening or adjusting their policies on web3 and encryption to different extents.

The future development of cryptocurrency still has many uncertainties. However, true believers in encryption may need to focus more on how to make cryptocurrency reflect its true value, rather than being overly concerned about the attitudes of centralized institutions. The rise of cryptocurrency originated from its technological consensus being accepted by the masses, and the future development path may still rely on this bottom-up force.