Friday 24 September 2021

Chinese Central Bank Defines Cryptocurrency Business as Illegal

 Recently, ten China's governmental departments including the People's Bank of China issued the "Notice on Further Preventing and Disposing of the Risks of Hype in Virtual Currency Transactions" (hereinafter referred to as the "Notice"). The relevant person in charge of the People's Bank of China answered reporters' questions on related issues.

PBC defines cryptocurrency business as illegal

1. What is the context of the "Notice"?

In recent years, Bitcoin and other virtual currency trading hype activities have become widespread, disrupting economic and financial order, breeding money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities, seriously endangering the safety of people's property. In accordance with the decision and deployment of the Party Central Committee and the State Council, the People’s Bank of China, in conjunction with relevant departments, has issued a series of policies and measures to clarify that virtual currencies do not have legal tender status, prohibit financial institutions from developing and participating in virtual currency-related businesses, and clean up and ban domestic virtual currency transactions and token issuance financing The platform continued to carry out risk warning and financial consumer education, and achieved positive results. In order to establish a normalized work mechanism and always maintain a high-pressure crackdown on virtual currency trading activities, the People's Bank of China and other departments have combined the new risk situation and drafted the "Notice" based on the previous work experience.

2. How does the "Notice" characterize virtual currencies and related business activities?

China's regulatory policies on virtual currencies are clear and consistent. The "Notice" once again emphasizes that virtual currencies that are issued by non-monetary authorities, use encryption technology, distributed accounts or similar technologies, and exist in digital form, such as Bitcoin, Ethereum, etc., including so-called stable currencies such as TEDA, are not It has the same legal status as legal tender and cannot be circulated in the market as currency. The "Notice" clearly stated that virtual currency exchange, virtual currency trading as a central counterparty, provision of matching services for virtual currency transactions, token issuance financing, and virtual currency derivative transactions are all illegal financial activities and are strictly prohibited. , Resolutely banned in accordance with the law; overseas virtual currency exchanges to provide services to Chinese residents through the Internet are also illegal financial activities.

3. What work measures are proposed in the "Notice"?

The first is to establish a normalized working mechanism of departmental coordination and central-regional linkage. At the central level, ten departments including the People’s Bank of China, the Central Cyberspace Administration of China, and the Ministry of Public Security have established a coordination mechanism to coordinate and promote the implementation of work as a whole; at the local level, the provincial people’s governments implement the responsibility for territorial risk handling, and ban and crack down on the illegality of virtual currencies in their jurisdictions in accordance with the law. Financial activities.

The second is to strengthen the monitoring and early warning of the risk of speculation in virtual currency transactions. The People's Bank of China and the Central Cyberspace Administration of China have improved the functions of virtual currency monitoring technology platforms to improve the accuracy and efficiency of identifying and discovering virtual currency transaction hype activities. Financial institutions and non-bank payment institutions have strengthened their monitoring of virtual currency transaction funds. All departments and regions shall strengthen the effective connection of online monitoring, offline mapping, and fund monitoring, and establish information sharing and cross-validation mechanisms.

The third is to build a multi-dimensional, multi-level virtual currency transaction speculation risk prevention and disposal system. Financial management departments, cybersecurity and informatization departments, telecommunications departments, public security departments, and market supervision departments work closely together to cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law, strengthen the registration and advertising management of relevant market entities, and crack down on relevant illegal financial activities in accordance with the law. Comprehensive policies are implemented in such aspects as illegal and criminal activities, and relevant industry associations have strengthened member management and policy publicity, so as to prevent and deal with the risks of virtual currency transaction speculation in an all-round way.

4. What are the follow-up work arrangements?

Cracking down on the speculation of virtual currency transactions is an important decision and deployment made by the Party Central Committee and the State Council. It is an inevitable requirement for the implementation of the people-centered development concept and the implementation of the overall national security concept. All departments and regions will conscientiously implement the various measures proposed in the "Notice", build a long-term work mechanism that is coordinated by the central government, implemented by the locals, combined with different disciplines, and jointly responsible, always maintain a high-pressure situation, dynamically monitor, and timely deal with related risks. Resolutely curb the hype in virtual currency transactions, severely crack down on illegal financial activities and illegal criminal activities related to virtual currencies, protect the safety of the people's property in accordance with the law, and make every effort to maintain economic and financial order and social stability.

Source: The People's Bank of China

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