A brief history of the legal development of BTC in the past 14 years

原文标题：《 一文梳理 BTC 十四年法律发展简史 》

  Xiao Sa's legal team

This is the first brief history of bitcoin law.

Since January 4, 2009, Satoshi Nakamoto created the bitcoin creation Block #0 in a small server in Helsinki, Finland, and mined the world's first 50 bitcoins, Bitcoin has passed the 14th anniversary. As an early professional legal team focused on virtual currency and blockchain technology in China, Sa's team witnessed the rise and fall of bitcoin along the way.

In these extraordinary 14 years, the battle against virtual assets in major jurisdictions around the world has spread from the most essential legal definition to financial regulation, anti-money laundering, anti-terrorist financing, and cyber fraud. Virus extortion prevention, dark net ban, virtual asset tax, data confirmation and many other areas. To put it another way, the 14 years of Bitcoin have also been 14 years of rapid regulatory growth in the digital economy. Today, we will review and sort out the 14 years of development of bitcoin and virtual assets legal regulation with memorable events.

01, 2008

Major events: Satoshi Nakamoto releases Bitcoin: A peer-to-peer cash Payment System

The year 2008 is a very special and memorable year for both China and the world. In that year, the subprime mortgage crisis originated in the United States evolved into a global international financial crisis, and the financial storm called tsunami swept every corner of the world. In that year, Wenchuan was hit by the once-in-a-thousand year earthquake disaster. The hearts of 1.3 billion Chinese people were closely linked. Jobs was running a fruit factory that year and was about to unveil his plump ideals to the world, but in front of him was another dead legend who could crack open walnuts; In that year, China held the Olympic Games for the first time. The fireworks on the Bird's Nest in Beijing were just like the vigorous vitality of China at that time, which became the most concrete expression of the Chinese dream...

That was also the year that Satoshi Nakamoto published the Bitcoin white paper "Bitcoin: "A peer-to-peer Cash Payment System," which at 2,736 words is shorter than the 3,550 words of the U.S. Constitution, but it was this concise white paper that started Bitcoin's 14-year saga.

02 2009

Memoranda: Genesis block was born and Bitcoin flourished

On January 3, 2009, Satoshi Nakamoto created the first block in the bitcoin world -- "Genesis block", and created the first 50 bitcoins in the world, and left the first information of the blockchain: "TheTimes 03/Jan/2009 Chancellor on brink of second bailout for banks" (" January 3, 2009, British Chancellor on Brink of Second Bank rescue ") was the headline in The Times of the day. At that time, in the midst of the global financial crisis, British Chancellor of the Exchequer Alistair Darling considered a second bank rescue. In retrospect, this is both a testament to the creation of the genesis block and a mockery of the financial crises that centralised financial systems inevitably produce, and of the drawbacks inherent in the old World banking system.

That year, Bitcoin was still out of the reach of regulators in major countries around the world, and no one was aware that a new financial system was being built that could profoundly change the future of economic development.

03 2010

Memorized: $100 million pizza and the first hard fork

The landmark event of the year was the famous Bitcoin "pizza buying" event. In 2010, Laszlo Hanyecz, who lives in Florida, United States, successfully used 10,000 bitcoins to buy a pizza. It was the first time in history that anyone successfully used bitcoin to buy a physical commodity in the real world. At today's Bitcoin prices, This is a $160 million pizza.

On August 6, 2010, a major flaw in the Bitcoin protocol was discovered: transaction information was listed in the transaction record, or "blockchain", without being properly verified, allowing users to create countless bitcoins by bypassing the bitcoin authentication mechanism. On August 15, the bug was maliciously exploited to generate 184.4 billion bitcoins, which were sent to two Bitcoin addresses. This vulnerability was quickly discovered, and the Bitcoin network protocol also ushered in the first hard fork upgrade, which successfully solved the crisis. Later, this way was adopted by Ethereum network and affected the development process of Web3 history. It's worth noting that this was the year Mt.Gox, one of the most notorious bitcoin exchanges in history, launched, setting the stage for a massive bitcoin crash years later that still reverberates today.

At this stage, Bitcoin began to creep into the minds of regulators, and the discussion about bitcoin began to "break the circle."

04 2011

Events: Dark web Silk Road online, virtual currency regulation

It is no overstatement to say that 2011 is the beginning year of legal supervision of virtual assets. Thanks to the rampant dark net and the three technical characteristics of virtual currency itself, namely anonymous payment, decentralization and imtamperability, transaction subjects are more difficult to determine and track, and relevant cases are extremely difficult to investigate. The crime of virtual assets became the focus of the legal circle and began to discuss the anti-money laundering supervision of virtual assets in a real sense.

In February 2011, Silk Road, the most notorious dark web in history for bitcoin transactions, went live. It is owned by Dread Pirate Roberts. Silk Road is a black market shopping site that uses Bitcoin for transactions and Tor's covert service. In this black market, almost every kind of contraband can be purchased, including but not limited to drugs and controlled substances, firearms, child pornography, high-value art, stolen jewelry, and more. Most of the sellers are from Britain and the United States, according to media reports.

In addition, Silk Road was the first to use Bitcoin to launder money, laundering a large amount of black money in various covert transactions. In 2011, the two senators Charles Schumer of New York and Joe Manchin of West Virginia were so concerned that they wrote to the relevant US authorities, Calls for an investigation into Silk Road and Bitcoin. Finally, on October 2, 2013, the FBI shut down Silk Road on the grounds of combating criminal activity, and Ross Ulbricht was transferred. The fall of Bitcoin's criminal pioneer will cast a shadow over its deep connection to crime for a long time to come.

05, 2013

Major events: The Chinese government has issued its first regulatory document on bitcoin, clarifying the nature of bitcoin

Now, the mention of China's virtual asset regulation has to start from 2013. In 2013, the People's Bank of China and five other ministries and commissions issued the Notice on Preventing Risks of Bitcoin (hereinafter referred to as the Notice), which clarified the nature of Bitcoin for the first time and held that Bitcoin was not issued by monetary authorities, did not have the property of currency such as legal compensation and mandatory, and was not a currency in the real sense. In nature, Bitcoin is a kind of virtual goods, which does not have the same legal status as currency. It cannot and should not be used as currency in the market. However, as a kind of commodity buying and selling behavior on the Internet, ordinary people have the freedom to participate in the Bitcoin transaction on the premise of assuming their own risks.

06 2014

Memoranda: The Mt.Gox Mentougou crash

Mt.Gox (also known as Mentougou) was a bitcoin exchange founded by Jed McCaleb, an American programmer who later bought it and moved its headquarters to Tokyo. At that time, Mt.Gox was the largest bitcoin exchange in the world, monopolizing 80% of the global bitcoin transactions, and the infamous Mentougou crash was the first centralized exchange collapse in the history of Bitcoin caused by hackers.

Feb. 7, 2014: Mt.Gox suspends all bitcoin withdrawal services, citing a flaw in the system, and all bitcoin withdrawal services have been suspended since. February 23, 2014: Mark Karpel resigns from the board of directors of the Bitcoin Foundation. That same day, Mt.Gox deleted all posts on its social media platform. On February 24, 2014, Mt.Gox suspended all trading activity and the trading platform went completely offline. According to media reports, Mentougou has been insolvent and completely collapsed after hackers stole 744,408 bitcoins. Feb. 28, 2014: Mt.Gox files for bankruptcy protection in Tokyo, and on March 9, in the United States.

It was precisely because of the Mentougou event that the bitcoin market suffered a violent shock. Thousands of investors were wiped out of bitcoin, and the price of bitcoin fell by 36% in a short period of time. The market fell into the freezing point at one time, which was also the first major crash event in the development history of bitcoin. After this battle, it took several years for Bitcoin to restore market confidence, but also for regulators to ring the alarm, virtual currency regulation is put on the agenda. Especially in the field of tax regulation, the Internal Revenue Service (IRS, hereinafter referred to as "IRS"), the federal Department of the Treasury of the United States, began to establish a taxpayer reporting system in the field of digital currency in 2014. The system aims to bring digital currency-related transactions into the tax regulatory system at the federal level.

Subsequently, the US Internal Revenue Service issued the "2014-21 Circular - Guidelines for Virtual Currencies" (hereinafter referred to as the "2014-21 Circular"), which recognized digital currencies that can be converted into legal tender as "assets". And further clarify the property tax principles applicable to the mining, holding and trading of digital currency behavior process; Taxpayers who receive more than $600 worth of digital currency for providing goods or services need to report to the IRS; Third-party payment providers that use digital currency as payment will be required to file with the IRS if they make more than $20,000 in transactions in a year, or if they make more than 200 transactions for a single customer. Overall, the 2014-21 circular is only a blanket guideline, which sets out a series of tax requirements related to digital currency transactions, but does not give detailed tax methods and plans.

07 2015

Big story: World's first Bitcoin regulation Ethereum goes live

On June 3, 2015, after the Mentougou incident, the New York State Department of Financial Services announced a series of regulations on bitcoin and digital currency service companies, which stipulates that companies providing services to New York residents must apply for a "BitLicense" license within 45 days. The rules are the first government regulations in history that specifically target the digital currency business. In response, several of the largest bitcoin exchanges at the time, including Bitfinex, Kraken and ShapeShift, announced they were suspending their services to New York State residents, a license requirement that has remained in place ever since.

It is worth mentioning that on July 30, 2015, Ethereum officially went live. It was proposed by programmer Vitalik Buterin after being inspired by Bitcoin, roughly meaning "more scalable next-generation cryptocurrency and decentralized application platform". It was developed through ICO crowdfunding in 2014 and launched in 2015. Became the largest public chain today and dominated the development of Web3 today.

08 2017

Memorabilia: The Bitcoin ransomware virus is rampant

On May 12, 2017, the WannaCry worm infected a large number of computers worldwide through the MS17-010 vulnerability. The worm infects a computer with a blackmailer virus that encrypts a large number of files. When a victim's computer is locked, the virus prompts him to pay the equivalent of $300 in bitcoin to unlock it. From a historical perspective, ransomware is one of the most influential viruses since panda incense. The WannaCry ransomware outbreak hit 300,000 users in at least 150 countries, causing losses of $8 billion and affecting many industries, including finance, energy, healthcare and education. Even today, according to data from independent third-party investigation agencies, ransomware is still active and continues to cause huge losses every year, becoming one of the important sources of money laundering in virtual currencies.

09 2021

Major events: September 24 circular issued, virtual currency withdrawal from the Chinese mainland

During this period, the supervision of virtual assets in our country has changed from the "hidden prohibition" to the "comprehensive prohibition". After the aforementioned "Notice on Preventing Bitcoin Risks" issued in 2013, Chinese regulators actually argued that: "Bitcoin and other so-called virtual currencies have increasingly become tools for money laundering, drug trafficking, smuggling, illegal fund-raising and other criminal activities. Investors should remain vigilant and report to the police immediately if they find clues of criminal activities." This phase (until 2021) could include China in the list of countries that have adopted an implicit ban on digital currency-related transactions.

The milestone is September 24, 2021. On the same day, the National Development and Reform Commission and 11 other departments issued a notice on the crackdown on virtual currency "mining" activities (hereinafter referred to as the "Notice"), announcing that virtual currency "mining" activities will be officially listed as an obsolete industry. At the same time, the People's Bank of China and 10 other departments issued the Notice on Further Preventing and Dealing with the Risk of Speculation in Virtual Currency Transactions (hereinafter referred to as the "Notice of the Central Bank"), clarifying that virtual currency does not have the same legal status as legal currency, and relevant business activities are illegal financial activities. Since then, mining activities have been completely banned and banned in mainland China, and all virtual currency trading platforms have stopped all financial activities in mainland China and for users in mainland China. Under this move, many famous trading platforms have left their hometown, and most of them began to seek development in neighboring Po County.

This document is a symbol of our transformation from the recessive prohibition to the overall prohibition of virtual currency.

10 2022

Memorabilia: Luna Plunge, Three Arrows & The FTXS both went bust, ushering in the second ice Age

After a boom in 2021, crypto assets plunged in May 2022, starting with the stablecoin TerraUSD and its sister Token Luna, ushering in the second massive ice age in coin history since the Mentougou Event. Terra and Luna have brought down the entire cryptocurrency market, resulting in the bankruptcy of Three Arrow Capital, a multi-billion dollar venture capital firm founded by Zhusu and KylesLdavies. According to media reports, Three Arrow Capital filed for bankruptcy protection in the bankruptcy Court for the Southern District of New York on July 1, and has accumulated billions of dollars in bankruptcy debts. After this battle, not only the virtual currency suffered a great blow, the price of bitcoin once precipitous plunge, and so far has not recovered, and even many virtual assets including NFT have suffered a joint blow, a slump.

And at the end of 2022, when we thought the currency circle had hit the freezing point and every step would be better, FTX showed us that things are never the worst, only worse. FTX, the world's second largest virtual currency exchange platform, announced via social media on Nov 11, China's Singles Day shopping festival, that it and other FTX Group affiliates have initiated voluntary bankruptcy proceedings in accordance with relevant US laws. Sam Bankman Fried (SBF), founder and CEO of FTX, has resigned, and the new CEO is bankruptcy lawyer John J. Ray.

In fact, Sa's team believed that FTX's bankruptcy was even more influential than Mentougou's, not only because of the huge amount of bankruptcy debts, but also because it revealed to regulators the potential huge financial risks of virtual asset trading platforms and the possibility that they were "pretending to be compliant". After FTX incident, many regulatory agencies have expressed serious concern about the subsequent development and investigation results of this incident. It can be said that FTX has changed the development history of virtual assets by itself, and it is almost certain that virtual assets will enter into strict supervision in major financial active jurisdictions in the future.

Write at the end

The 14 years of bitcoin is not only the wind and rain of crypto assets, but also the 14 years of the development of our digital economy. The 2008 Olympic fireworks reflected the glory of China's next decade, but now we are ushered into a more challenging era. It can be said that bitcoin is both an influence and a witness of the changes in the world economic and political landscape over the years. Sa's team is a legal service team that has grown up together with virtual assets, especially bitcoin, and will devote itself to financial and technological innovation in the future. Either way, tomorrow still comes, and we look forward to witnessing the next decade of Bitcoin legend.

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