According to an official article by the Xianning police in Hubei (" 17 mobile phones + 5 computers, 7 people arrested! Don't cross the red line of "climbing the firewall"! "), they recently cracked a case of "unauthorized use of illegal channels for international networking" (translated as using a firewall-climbing tool to access the overseas Internet). Cases of people being caught for climbing the firewall are common every year, and the reason why this case attracted the attention of Lawyer Liu (web3_lawyer) is mainly because it involves virtual currency.
I. Brief Introduction of the Case
On April 6, 2025, the Xi'an Public Security Bureau received a clue that someone in the jurisdiction was engaged in suspected illegal cross-border network business activities. The public security organs eventually found that a criminal team headed by Tang Moumou used multiple network devices and illegal channels to access the international Internet and used overseas software to engage in illegal transactions in virtual currency and foreign exchange.
The public security authorities verified that Tang and his studio had established a network channel to conduct cross-border virtual asset transactions, "forming a complete illegal chain." The article also said that after "police officers worked for 24 hours to collect evidence and completely secured electronic evidence, the people involved confessed to their illegal acts."
There are some ambiguities in the article published by Xianning Public Security Bureau. The article begins by saying that a total of 7 offenders were administratively punished; but the second paragraph says that "the criminal team headed by Tang Moumou..., arrested 5 people involved in the case on the spot..."; and the article ends by saying that the public security organs imposed administrative penalties on Tang Moumou and 7 others. The number of people and nature of the cases involved in the same article are different. It should be noted that the legal meaning of "criminal gang" is at least suspected of criminal offenses, which is a completely different legal consequence from administrative violations. However, the last sentence of the article, "The case is currently being further investigated," is thought-provoking. It is possible that the public security organs are still looking at whether the case meets the criminal case filing standards.
Of course, this may be due to the fact that the editor of the article is not a legal practitioner and the writing is not rigorous. The conclusion we can draw from the Xianning Public Security article is that Tang and others invested in virtual currency by accessing the Internet through a VPN and were eventually arrested and given administrative penalties.
2. Is it illegal to climb over the firewall?
The public security organs across the country, including the Xianning Public Security Bureau, currently punish the behavior of circumventing the firewall based on Article 6 and Article 14 of the "Interim Regulations on the Management of International Networking of Computer Information Networks" that came into effect in 1997. That is, "using illegal channels for international networking without authorization."
However, Lawyer Liu has analyzed in many articles that the regulations that have not been revised so far only define "illegal channels" as physical channels (wires, optical cables, communication satellites, etc.) and do not include virtual currency channels (such as VPNs). Some people who use VPS tools to bypass the firewall cannot be said to have illegally built network channels.
In terms of time, the regulations came into effect in 1997, when there was no GFW or virtual channels. It was only later, with the continuous popularization and development of the Internet in China, as well as changes in China's domestic and international political environment, that China implemented Internet control, with GFW technology as a representative. The Chinese mainland Internet blocked a large number of overseas websites, so the term "climbing the wall" came into being. However, this Internet control is more about technical and political factors. Chinese laws, regulations, and departmental rules do not prohibit Chinese citizens from accessing the overseas Internet.
Therefore, Lawyer Liu has always believed that circumventing the firewall is not illegal, because there is no law prohibiting circumventing the firewall. In fact, for the public security organs and other law enforcement departments, judging whether an act is illegal has nothing to do with whether a circumvention of the firewall is used. For example, engaging in pornography, reactionary keyboard politics (according to the legal evaluation standards in mainland China), etc., is illegal even if one does not circumvent the firewall.
3. Is cryptocurrency speculation illegal?
So is it illegal to trade cryptocurrencies by climbing over the firewall? Lawyer Liu also believes that it is not illegal. The reasons are as follows:
First, the "9.24 Notice" ("Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation") only stipulates the principle of self-risk for legal persons, non-legal persons, and natural persons investing in virtual currencies and their derivatives within China. Only when they are "suspected of disrupting financial order and endangering financial security, they will be investigated and dealt with by relevant departments in accordance with the law."
Second, regarding the legal judgment on the use of overseas virtual currency exchanges: The "9.24 Notice" prohibits overseas virtual currency exchanges from conducting business in mainland my country through the Internet and characterizes it as "illegal financial activities", but this only applies to the behavior of virtual currency exchanges, that is, it only regulates virtual currency exchanges; and for mainland citizens who use overseas virtual currency exchanges to speculate in cryptocurrencies, the "9.24 Notice" does not stipulate any adverse legal consequences.
Third, if ordinary citizens or their studios are just speculating in cryptocurrencies to make money, it is hard to say that it will reach the level of undermining the national financial order or endangering financial security. If it reaches this level, the judicial authorities will also need to provide evidence. Back to the case of Tang and seven others in the article, the public security article also mentioned that they conducted "illegal foreign exchange transactions". If this foreign exchange is real foreign exchange, not "fake foreign exchange" such as USDT and USDC, then Tang and others may have violated the relevant regulations of the State Administration of Foreign Exchange or the central bank.
IV. Conclusion
Through the above analysis, we believe that cryptocurrency speculation is not illegal in China, and circumventing the firewall for legitimate purposes is not illegal. However, as a web3 lawyer, I must point out that even if cryptocurrency speculation is not illegal, my country has actually cut off all channels for legal deposits and withdrawals (for example, banks, third-party payment companies, etc. have explicitly prohibited the use of their payment and settlement channels for virtual currency transactions), and in practice, there are a large number of cryptocurrency players who receive stolen money when withdrawing money; even if circumventing the firewall is not illegal, we have hundreds of cases every year where administrative penalties are imposed simply for circumventing the firewall. In other words, even if circumventing the firewall + cryptocurrency speculation does not have legal risks, it is full of "legal risks". Even if this "legal risk" is essentially a risk created by law enforcement officers misunderstanding the law, once you get caught up in it, you will find that the difficulty and high cost of defending your rights are unbearable for many ordinary people, so you can only admit defeat.
As legal practitioners, we hope and are also trying to push the authorities to clarify the regulatory standards for accessing overseas Internet (although this may feel a bit weird or even ridiculous in the Internet age). The interim regulations of 1997 are indeed completely inapplicable to this era.
