Risk skyrocketing! Let's talk about the current red lines in our country's crypto OTC market...

Written by: Xiao Sa Legal Team

As a key link connecting fiat currency and virtual assets, cryptocurrency OTC trading is frequently exploited by illegal activities such as telecom network fraud and online gambling due to its anonymity and cross-border features, becoming an important channel for fund circulation and money laundering. Whether individual traders or related institutions, practitioners face extremely high criminal legal risks. This article systematically analyzes the legal boundaries of cryptocurrency OTC trading from the perspectives of applicable criminal charges, subjective “knowing” determination, threshold standards for amounts, and judicial practice considerations, providing guidance for risk avoidance.

Participating in cryptocurrency OTC trading and knowingly or should have known that the funds originate from crimes such as telecom network fraud or online gambling, and still providing payment settlement, fund transfer, or other assistance, may trigger multiple criminal charges, including aiding information network criminal activities, concealing or disguising criminal proceeds, money laundering, and even being identified as accomplices in upstream crimes such as fraud or illegal gambling. The specific scope of charges must be comprehensively judged based on the subjective cognition of the actor, degree of participation, nature of upstream crimes, and involved amounts. It is noteworthy that in judicial practice, the determination of “knowing” is not based on the actor’s self-admission but inferred through objective evidence such as transaction prices, methods, frequency, abnormal account activities, and the actor’s professional background. Once the standards for payment settlement amounts or illegal gains specified in judicial interpretations are met, the conduct will be deemed to involve “serious circumstances,” facing harsher penalties. Therefore, establishing strict customer identity verification and source of funds review mechanisms has become an essential task for OTC participants.

1. Distinction between Helping Crime and Upstream Co-conspirator

Providing payment settlement assistance to upstream crimes is the main criminal behavior in cryptocurrency OTC trading. The core of criminal responsibility recognition lies in distinguishing whether the conduct constitutes an independent aiding of information network criminal activities (hereinafter referred to as “helping crime”) or forms a joint crime with upstream offenders.

The core feature of independent helping crime is providing “one-to-many” payment settlement assistance for unspecified network crimes, with no prior conspiracy or stable cooperation between the actor and upstream offenders. According to Article 287 of the Criminal Law of the People’s Republic of China (2023 Amendment), knowingly assisting others in committing crimes via information networks, and providing payment settlement or similar help with serious circumstances, constitutes helping crime. Article 12 of the Supreme People’s Court and Supreme People’s Procuratorate’s Interpretation on the Application of Law in Handling Criminal Cases of Illegal Use of Information Networks and Helping Network Crime clarifies that if the payment amount exceeds 200,000 yuan, or if funds are provided through advertising or other means exceeding 50,000 yuan, or illegal gains exceed 10,000 yuan, it should be deemed “serious circumstances.” Additionally, the Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Telecom Network Fraud (II) include behaviors such as purchasing, selling, or renting internet accounts, passwords, or online payment interfaces with payment functions within the scope of “help,” directly covering OTC merchants’ fund flows via virtual currency trading platforms.

In judicial practice, such cases are common: (2024) Ji 0803 Criminal First Instance No. 1 involved defendant Wu Mouhai using multiple Alipay accounts to provide payment settlement help for gambling platforms, with involved amount of 3.78 million yuan, recognized as helping crime; (2025) Ji 0303 Criminal First Instance No. 67 involved defendant Fu Mou organizing others to transfer funds via bank cards for gambling, with transaction flow exceeding 6.09 million yuan, also convicted as helping crime. It is important to note that even if not directly transferring funds, introducing or facilitating others to provide payment tools may also constitute a crime. For example, in case (2024) Xin 4002 Criminal First Instance No. 30, Min Mou, knowing Zhao Mou engaged in online gambling, still introduced bank cards for him, ultimately being identified as an accomplice in helping crime.

If the conduct involves prior conspiracy or stable cooperation with upstream offenders, it may be recognized as an accomplice in upstream crimes. According to the Opinions on Several Issues Concerning the Application of Law in Handling Network Gambling Crimes, knowingly assisting others in committing fraud or gambling by providing payment settlement services constitutes accomplice to fraud or gambling crimes; providing funds settlement services to gambling websites, charging service fees over 10,000 yuan, or helping to collect gambling funds over 200,000 yuan, constitutes accomplice to illegal gambling. In a case tried by the Handan Intermediate People’s Court in Hebei Province in 2025, a gaming platform used virtual assets “Ling Stone” as chips to set up gambling modules, with players privately buying and selling “Ling Stone” through channels like QQ, Taobao, and Fish, forming an OTC transaction chain involving over 557 million yuan. Xu Mou, previously convicted of illegal gambling, knew the platform involved gambling but served as a primary agent, promoted through social circles, developed subordinate players, and profited from buying and selling “Ling Stone” via the Fish app, ultimately being identified as an accomplice in illegal gambling. Cases such as (2024) Min 0721 Criminal First Instance No. 4 and (2024) Ji 0284 Criminal First Instance No. 97 also clearly state that providing continuous and specialized fund transfer services for online gambling is easily recognized as an accomplice in illegal gambling. The Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Helping Network Crime further specify that prior conspiracy or stable cooperation in acquiring or organizing personnel for others to commit fraud or other crimes via information networks should be punished as upstream crime accomplices. A typical case involved defendant Fu Mou, who conspired with telecom fraud gangs to organize account acquisitions and transfer fraud proceeds, being convicted as an accomplice of fraud, with a sentence far exceeding helping crime, serving as a strong warning to OTC merchants.

2. Subjective “Knowing” Determination

“Knowing” is the core subjective element for establishing helping crime, concealment, money laundering, and other charges. Judicial practice adopts the principle of “rebuttable presumption,” which infers subjective cognition based on objective conduct, while allowing the defendant to present counter-evidence.

Relevant judicial interpretations and meeting minutes clarify the circumstances under which “knowing” is presumed. The Interpretation on the Application of Law in Handling Criminal Cases of Illegal Use of Information Networks and Helping Network Crime lists situations such as continuing to implement after being informed by regulatory authorities, obvious anomalies in transaction prices or methods, providing technical support specifically for illegal activities, and frequently using covert online measures to evade supervision. The Opinions on Several Issues Concerning the Application of Law in Handling Criminal Cases of Telecom Network Fraud (II) require a comprehensive assessment based on transaction frequency, the actor’s cognitive ability, past experience, and profit situation. Industry practitioners such as telecom and banking personnel who illegally open or sell accounts using their official positions can be directly presumed to “know.” The “Break the Card” campaign meeting minutes also add features like cross-provincial or multi-person bulk account opening, continued transactions after being informed of fraud risks, continued use after account freezing, frequent encrypted communications, and pre-prepared responses to investigations.

These presumptive circumstances are very common in OTC transactions. For example, using encrypted communication tools like Telegram, frequently changing trading accounts, or prices deviating from market rates can serve as strong evidence for judicial inference of “knowing.” In practice, the determination of “knowing” does not rely solely on defendant statements; even if the actor denies, suspicious transaction times, locations, or fund transfer paths can be used to infer subjective knowledge based on comprehensive evidence, with increasingly strict review standards.

Despite strict presumptions, actors still have defenses. “Good faith acquisition” is an important defense. According to judicial interpretation, if the actor can prove they were genuinely unaware and had exercised reasonable caution, they may not be convicted. In practice, OTC merchants who only list on a single platform, select sellers with long registration histories, inquire about fund sources, and require buyers to provide bank statements, identity information (including video recordings), and payment details for consistency verification can be deemed to have fulfilled reasonable due diligence, constituting good faith acquisition. This underscores the importance of establishing comprehensive customer identity verification (KYC), source of funds review, and transaction record retention mechanisms to prevent criminal risks. Moreover, confessions and electronic evidence are crucial for subjective state assessment. Statements during interrogation, communication records during transactions, and compliance review records can all serve as key evidence to determine whether the actor “knew.”

3. Application of Concealment and Money Laundering Crimes

When OTC transactions involve proceeds from specific serious crimes, the conduct may not only constitute helping crime or upstream accomplice but also violate concealment or disguising proceeds of crime (hereinafter “concealment”) or money laundering, both of which are more targeted at combating laundering activities.

The scope of concealment is broad. According to Article 312 of the Criminal Law (2023 Amendment), knowingly concealing, transferring, purchasing, or selling proceeds of crime or their benefits, or disguising or hiding their source and nature by other means, constitutes this crime. “Other means” include providing accounts or transferring funds via bank transfers. The Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Concealing or Disguising Crime Proceeds clarifies that concealment or disguising amounts exceeding 100,000 yuan are considered “serious circumstances,” with a penalty of 3 to 7 years imprisonment. In cases such as (2025) Wan 0111 Criminal First Instance No. 111, defendants Cheng Mouqiao and Wang Mouge transferred criminal proceeds by purchasing virtual currency, with amounts of over 810,000 and 670,000 yuan respectively, recognized as concealment with “serious circumstances.” Multiple cases like (2024) Jin 0724 Criminal First Instance No. 109 and (2024) Jing 0102 Criminal First Instance No. 562 involved defendants assisting in transferring scam funds via bank cards or virtual currency, convicted as concealment. These demonstrate that concealment is a common charge in practice for transferring and cashing out scam proceeds.

Money laundering crimes are limited to seven categories of upstream crimes: drug crimes, organized crime, terrorism, smuggling, corruption and bribery, disrupting financial order, and financial fraud. Article 191 of the Criminal Law (2023 Amendment) explicitly states that transferring or converting proceeds from these crimes through virtual asset transactions can be recognized as “disguising or hiding the source and nature of crime proceeds and their benefits,” providing a direct legal basis. Practical analysis indicates that the presumptive logic established by the new judicial interpretation on money laundering can extend to concealment, leading to stricter review standards for OTC merchants. For example, continued transactions after bank account freezing can serve as important evidence for presuming “should have known.” If transactions involve funds from the seven categories of crimes, transferring via virtual currency may simultaneously violate money laundering and illegal business operations, constituting a hypothetical cumulative offense, with the more severe penalty applied. Since the threshold for serious circumstances of money laundering (e.g., over 5 million yuan) may be lower than that for “particularly serious circumstances” of illegal business (e.g., over 25 million yuan), money laundering could result in more severe liability.

4. Industry Regulation and Administrative Penalties

Cryptocurrency OTC trading faces not only criminal risks but also clear industry regulatory bans and administrative penalties, forming a “criminal + administrative” dual regulatory framework. From industry self-discipline, the China Payment and Clearing Association’s notices on key reporting items for 2025 and 2024 explicitly list “providing payment services for illegal transactions such as telecom network fraud and cross-border gambling” as key reporting items, clearly delineating industry red lines. At the national legal level, Article 25 of the Anti-Telecom Network Fraud Law explicitly prohibits any organization or individual from providing virtual currency transaction support or assistance for others’ telecom network fraud activities, requiring internet service providers to monitor and identify payment and settlement activities. More critically, the Notice on Further Preventing and Disposing of Virtual Currency Trading and Speculation Risks issued by the People’s Bank of China and other departments explicitly deny the legality of virtual currency-related business activities, strictly prohibiting and lawfully banning activities such as legal currency and virtual currency exchanges, and pursuing criminal responsibility for violations, providing policy support for administrative regulation and criminal accountability.

Conclusion

The core of risk prevention in cryptocurrency OTC trading lies in maintaining the bottom lines of “subjective ignorance” and “compliance review.” For OTC merchants and practitioners, establishing sound mechanisms for customer identity verification, source of funds review, and transaction record retention is essential. Proactively avoiding high-risk behaviors such as abnormal prices, frequent account changes, and encrypted communication to evade regulation, while closely monitoring judicial practice and regulatory policies, is crucial. Only by clarifying legal boundaries and adhering to compliance can effective prevention of criminal and administrative risks be achieved, avoiding involvement in illegal criminal chains.