In mainland China, is it illegal or a crime to offer rebates to attract new customers for cryptocurrency exchanges?
First, the conclusion: starting is illegal, accepting administrative penalties can easily turn into a crime.
1. Why is it illegal?
The Chinese government's attitude towards activities related to virtual currency trading is very clear: a complete ban.
The most core and decisive legal document is the notice issued on September 24, 2021, by ten departments including the central bank, the Ministry of Public Security, the Supreme Court, and the Supreme Procuratorate (Notice on Further Preventing and Dealing with Risks of Speculation in Virtual Currency Trading) (referred to as the '9.24 Notice').
This notice defines all related actions as follows:
Virtual currency-related business activities are illegal financial activities (including exchange, buying and selling, and transaction matching).
Overseas cryptocurrency exchanges providing services to Chinese residents via the internet also constitute illegal financial activities. (This establishes the principle of "long-arm jurisdiction," meaning that regardless of where the exchange is registered, it is illegal as long as it serves Chinese citizens.)
Here's the key point—regarding the "referral bonus" terms:
The "September 24th Notice" clearly stipulates:
"Domestic staff of relevant overseas virtual currency exchanges, as well as legal persons, non-legal persons, and natural persons who knowingly provide marketing, payment settlement, technical support, and other services for virtual currency business activities, will be held accountable in accordance with the law."
Interpretation:
The practice of offering "commissions to attract new customers" perfectly aligns with the "marketing and promotion" clause mentioned above. Therefore, this behavior is fundamentally defined as participation in illegal financial activities.
Conclusion 1: The illegality is beyond doubt. At best, it will face administrative penalties such as warnings from regulatory authorities, orders to suspend operations for rectification, confiscation of illegal gains, and fines.
II. Why is it so easy to commit a crime?
In judicial practice, the act of offering commissions to exchanges for attracting new users rarely remains merely an "administrative violation." It usually constitutes a criminal offense because it involves large sums of money, a large number of people, or problems with the platform itself.
Here are the four most common offenses that this type of behavior constitutes:
1. Crime of aiding and abetting cybercrime (referred to as "aiding and abetting cybercrime")
This is currently the most common charge against low-level promoters and OTC merchants in the cryptocurrency industry, and is known as the "catch-all crime" in the cryptocurrency world.
Legal logic: If you knowingly provide advertising and promotion services to an exchange that uses information networks to commit crimes (such as fraud, operating casinos, money laundering, etc.), and the circumstances are serious.
The key point is the determination of "knowing": In the current legal environment, if you are deeply involved in cryptocurrency business and receive high commissions, the court often presumes that you have "general knowledge" of the platform's illegal nature. You cannot use "I didn't know the platform was doing anything wrong" to escape punishment.
Consequences: Imprisonment for up to three years or detention, with or without a fine.
2. Crime of organizing and leading pyramid schemes
Many cryptocurrency exchanges have rebate mechanisms designed with a clear hierarchical structure.
Legal Logic: If a user acquisition mechanism meets the following characteristics: Pyramid Scheme: Requires recruited users to recruit others. Entry Fee: Requires recruited users to deposit and trade a certain amount of cryptocurrency to activate their account or qualify for commissions. Tiered Compensation: Forms an upline-downline relationship, where uplines can continuously extract commissions from the transaction fees of downlines (usually becoming very risky beyond three levels).
Consequences: Imprisonment for up to five years or detention; if the circumstances are serious, imprisonment for more than five years.
3. Crime of illegal business operations
Legal Logic: Virtual currency trading-related businesses are defined as "illegal financial activities." If you, as an agent, organize large-scale user acquisition activities in China, and this involves not only online promotion but also offline studios and assisting clients with fiat currency exchange, you may be deemed to be engaging in illegal financial activities without state approval.
Consequences: For serious offenses, imprisonment for up to five years; for particularly serious offenses, imprisonment for five years or more.
4. Accomplices in fraud (the most serious case)
Legal Logic: If the exchange you're promoting is itself a "pig butchering scam" or a "Phishing scam," and the platform's purpose is to defraud users of their principal, then you, as the one recruiting customers, will be considered an accomplice to the fraud ring. Whether you know it's a scam or not, once you've shared in the profits, it's difficult to escape responsibility.
Consequences: Depending on the amount of money defrauded, the maximum penalty is life imprisonment.
III. Summary
In mainland China, the regulatory space for the cryptocurrency industry has essentially been reduced to zero, especially when it comes to trading and promotion services for the general public.
It is definitely illegal, and most likely a crime. If you make money this way and it meets the criteria for filing a case, your bank statements, your referral link records, and your chat logs with your upline can all be used as evidence in court.
