To the people’s governments of all provinces, autonomous regions, and municipalities and the Xinjiang Production and Construction Corps,
Trading and speculative activities on virtual currencies have been on the rise recently, which have been disruptive to the economy and the financial market, provided a hotbed for gambling, illegal fundraising, fraud, pyramid schemes, money laundering, and other illegal and criminal activities, and posed significant dangers to the resident’s properties. To take the prevention and resolution of the risks of virtual currency trading and speculation to the next level and duly safeguard national security and social stability, pursuant to the Law of the People’s Republic of China on the People’s Bank of China, the Law of the People’s Republic of China on Commercial Banks, the Securities Law of the People’s Republic of China, the Cybersecurity Law of the People’s Republic of China, the Regulation on Telecommunications of the People’s Republic of China, the Regulation on Preventing and Responding to Illegal Fundraising, Regulation on the Administration of Futures Trading, Decision of the State Council on Bringing Various Forms of Local Trading Venues into Compliance to Prevent Financial Risks, and Implementing Opinions of the General Office of the State Council on Bringing Various Forms of Trading Venues into Compliance, this Notice is hereby issued regarding the following matters.
I. Clarifying the nature of virtual currencies and related activities
(1) Virtual currencies do not have the same legal status as legal tender. Bitcoin, Ethereum, Tether, and other virtual currencies have the following distinguishing features: not being issued by monetary authorities, relying on cryptography and distributed ledger and similar technologies, and existing in digital forms. Because of those features, they are not legal tenders, and should not and cannot be circulated as currency in the market.
(2) Virtual currency-related activities are illegal financial activities. Exchanging legal tender for virtual currencies or vice versa, exchanging one virtual currency for another, buying and selling virtual currencies as a central counterparty, providing information and pricing services for the trading of virtual currencies, issuing tokens to raise funds, trading virtual currency derivatives, and engaging in other virtual currency-related activities are potentially instances of illegal issuance of coupons as substitutes for the legal tender, unauthorized public offering of securities, illegal conduct of futures business, or illegal fundraising. Such activities are unlawful and strictly prohibited by law, and shall be forcibly banned in accordance with the law. Any person that has committed such illegal financial activities that constitute a crime will be prosecuted for criminal liabilities.
(3) Provision of services by overseas virtual currency exchanges to residents in China via the internet is also considered to be an illegal financial activity. The domestic staff members of overseas virtual currency exchanges and those legal persons, unincorporated organizations, and natural persons that know or should have known that such exchanges are engaging in virtual currency-related business but still provide marketing, advertising, payment, settlement, technical support, or other services will be held accountable in accordance with the law.
(4) Participation in virtual currency investment and trading comes with legal risks. Where any legal person, unincorporated organization, or natural person breaches public order and good morals when investing in virtual currencies or related derivatives, the corresponding civil juristic behavior is void and the losses arising therefrom are to be borne by themselves. If they are further suspected of disrupting the financial market or undermining financial security, they will be investigated and penalized by relevant authorities.
II. Establishing sound mechanisms for addressing the risks of virtual currency trading and speculation
(5) Promoting coordination among government authorities. The People’s Bank of China will establish a coordination mechanism along with the Cyberspace Administration of China, the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant authorities to resolve major issues in a coordinated manner and urge and guide authorities in all regions to carry out work according to unified deployment.
(6) Focusing on local enforcement. Each provincial-level people’s government has overall responsibility for preventing and resolving the risks of virtual currency trading and speculation within its administrative region. Local financial regulatory authorities should take the lead in establishing regular work mechanisms along with branches of the financial regulatory authorities under the State Council as well as the cybersecurity, telecommunications, public security, market regulation and other relevant authorities to coordinate the allocation of resources, guard against and properly address risks concerning virtual currency trading and speculation, and safeguard economic and financial order and social harmony and stability.
III. Strengthening the monitoring and early warning of the risks of virtual currency trading and speculation
(7) Conducting comprehensive monitoring and early warning. Each provincial-level people’s government should give full play to the role of the monitoring and early warning mechanism, combine online monitoring with offline inspection, and enhance the accuracy and efficiency in identifying virtual currency trading and speculation. The People’s Bank of China, the Cyberspace Administration of China and other relevant authorities will continue to improve the technologies for monitoring cryptoassets to track the mining, trading, and exchange of virtual currency throughout the process and make a real-time backup of the information. Financial regulatory authorities should guide financial institutions and non-banking payment institutions to strengthen the monitoring of funds involved in virtual currency trading.
(8) Establishing an information sharing and quick-response mechanism. Under the leadership of the provincial-level people’s governments, local financial regulatory authorities should better coordinate online monitoring, offline inspection, and fund monitoring, establish an information sharing and cross-verification mechanism for virtual currency trading and speculation, and put in place a quick-response mechanism for the transmission, verification, and resolution of early warnings along with the branches of the financial regulatory authorities under the State Council, the cybersecurity authorities and the public security authorities.
IV. Establishing a multi-dimensional and multi-level risk prevention and resolution system
(9) No services from financial institutions and non-bank payment institutions for virtual currency-related activities. Financial institutions and non-bank payment institutions shall not provide services including account opening, funds transfers, and clearing and settlement for virtual currency-related activities, or incorporate virtual currencies into the scopes of collateral or pledges, or provide virtual currency-related insurance services, or incorporate virtual currencies into insurance coverage. Any clue to violations of laws and regulations should be promptly reported to relevant authorities.
(10) Strengthening management of the contents of and access to virtual currency-related online information. Internet companies shall not provide online business premises and commercial display, marketing, advertising, paid traffic or other services for virtual currency-related activities. They shall promptly report any clue to violations of laws and regulations to relevant authorities, and provide technical support and assistance to facilitate administrative and criminal investigations. Based on clues forwarded by financial regulatory authorities, the cyberspace and telecommunications authorities shall promptly shut down the websites, mobile applications, mini programs and other internet applications used for virtual currency-related activities in accordance with the law.
(11) Strengthening management of the registration of virtual currency-related market entities and advertising activities. Market regulatory authorities shall strengthen management of the registration of virtual currency-related market entities, and ensure that the registered name or the business scope of any enterprise or self-employed business shall not include such words or expressions as “virtual currency,” “virtual asset,” “cryptocurrency,” or “cryptoasset.” Market regulatory authorities shall, jointly with financial regulatory authorities, enhance oversight, in accordance with the law, over virtual currency-related advertisements and promptly investigate and impose penalties for illegal advertisements.
(12) Vigorously combating virtual currency-related illegal financial activities. Upon discovering a clue to any virtual currency-related illegal financial activities, local financial regulatory authorities shall, in cooperation with the branches of the financial regulatory authorities under the State Council as well as other authorities, promptly investigate, identify, and properly resolve the case in accordance with the law, and rigorously hold relevant legal persons, unincorporated organizations, and natural persons legally liable. If a crime is involved, the case shall be referred to the judicial authorities for investigation and punishments in accordance with the law.
(13) Vigorously combating virtual currency-related crimes. Ministry of Public Security shall task public security authorities nationwide to further their law enforcement operations against money laundering, cross-boundary gambling, and SIM card- and bank card-related crimes; vigorously crack down on the illegal operation of businesses, financial frauds, and other crimes in connection with virtual-currency activities, on money laundering, gambling and other crimes conducted in virtual currencies, and on illegal fundraising, pyramid schemes, and other crimes using virtual currencies as a stunt.
(14) Strengthening industry self-discipline. The National Internet Finance Association of China, Payment & Clearing Association of China, and China Banking Association shall strengthen their member management and policy promotion; advocate and supervise their members to prevent and avoid involvement in virtual currency-related illegal financial activities; and penalize, in accordance with relevant self-disciplinary rules, those members that breach regulatory policy or industry self-disciplinary rules. They shall leverage all types of industry infrastructures to monitor the risks of virtual-currency trading and speculation and promptly submit clues to relevant authorities.
V. Strengthening organization and implementation
(15) Strengthening organizational leadership and coordination. All government departments and administrative regions shall prioritize their responses to the risks of speculative trading of virtual currencies, enhance organizational leadership, and clarify working responsibilities so as to form a long-term working mechanism built on coordination by the central government and implementation by local authorities, with combined efforts of government departments and administrative regions, and joint responsibilities. Relevant agencies shall maintain a tough stance, dynamically monitor risks, and take effective actions to prevent and mitigate risks, protect people’s properties, and unremittingly safeguard the economy and financial order and the social stability.
(16) Enhancing policy interpretation, publicity and education. All government departments, administrative regions, and industry associations shall fully leverage various media and other communication channels to educate the public of the unlawfulness, harmfulness, and different forms of virtual currency speculation and related activities through interpretation of laws and policies, analysis of typical cases, and education of investment risks, so as to enhance the public awareness of risk prevention.
The People’s Bank of China
Cyberspace Administration of China
The Supreme People’s Court
The Supreme People’s Procuratorate
Ministry of Industry and Information Technology
Ministry of Public Security
State Administration for Market Regulation
China Banking and Insurance Regulatory Commission
China Securities Regulatory Commission
State Administration of Foreign Exchange
September 15, 2021
