Notice on Further Preventing and Addressing Risks from Virtual Currency Trading and Speculation

Notice on Further Preventing and Addressing Risks Arising from Virtual Currency Trading and Speculation — Yin Fa [2021] No. 237

To the people's governments of all provinces, autonomous regions and municipalities directly under the Central Government, and the Xinjiang Production and Construction Corps:

Recently, virtual currency trading and speculation have resurged, disrupting the economic and financial order, giving rise to gambling, illegal fundraising, fraud, pyramid schemes, money laundering and other illegal or criminal activities, and seriously endangering people's property. To further prevent and address risks arising from virtual currency trading and speculation and effectively safeguard national security and social stability, the following matters are hereby notified pursuant to provisions including the Law of the People's Republic of China on the People's Bank of China, the Commercial Bank Law of the People's Republic of China, the Securities Law of the People's Republic of China, the Cybersecurity Law of the People's Republic of China, the Telecommunications Regulations of the People's Republic of China, the Regulations on Preventing and Handling Illegal Fundraising, the Regulations on the Administration of Futures Trading, the State Council Decision on Rectifying Various Types of Trading Venues to Effectively Prevent Financial Risks, and the General Office of the State Council's Implementation Opinions on Rectifying Various Types of Trading Venues:

I. Clarify the essential nature of virtual currencies and related business activities

(1) Virtual currencies do not have a legal status equivalent to legal tender. Virtual currencies such as Bitcoin, Ether and Tether are characterized primarily by their issuance by entities other than monetary authorities, their use of cryptography and distributed ledgers or similar technologies, and their existence in digital form. They are not legal tender and should not and cannot circulate or be used as currency in the market.

(2) Business activities related to virtual currencies constitute illegal financial activities. Activities involving virtual currencies, including exchange between legal tender and virtual currencies, exchange between virtual currencies, buying or selling virtual currencies as a central counterparty, providing information intermediation and pricing services for virtual currency transactions, token issuance financing, and virtual currency derivatives trading, are suspected of involving illegal financial activities such as unlawful sales of token vouchers, unauthorized public securities offerings, unlawful operation of futures businesses, and illegal fundraising. All such activities are strictly prohibited and shall be resolutely banned in accordance with the law. Where such illegal financial activities constitute a crime, criminal liability shall be pursued in accordance with the law.

(3) The provision of services by overseas virtual currency exchanges to residents within China through the Internet also constitutes illegal financial activity. Liability shall be pursued in accordance with the law against the domestic staff of such overseas virtual currency exchanges, and against legal persons, unincorporated organizations and natural persons that know or ought to know that those exchanges engage in virtual currency-related business but nevertheless provide them with marketing and publicity, payment and settlement, technical support or other services.

(4) Participation in virtual currency investment and trading entails legal risks. Where investment in virtual currencies and related derivatives by a legal person, unincorporated organization or natural person violates public order and good morals, the relevant civil juristic act is void and the resulting losses shall be borne by that investor. Where such activities are suspected of undermining the financial order or endangering financial security, the relevant authorities shall investigate and deal with them in accordance with the law.

II. Establish and improve working mechanisms for addressing risks from virtual currency trading and speculation

(5) Strengthen interdepartmental coordination. The People's Bank of China, together with departments including 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 and the State Administration of Foreign Exchange, shall establish a coordination mechanism to jointly resolve major issues arising in this work and supervise and guide all regions in carrying out their work under unified arrangements.

(6) Strengthen implementation at the local level. Each provincial people's government bears overall responsibility for preventing and addressing risks related to virtual currency trading and speculation within its administrative region. Led by local financial regulatory departments, with participation from branches of the State Council's financial regulatory authorities and departments responsible for cyberspace affairs, telecommunications, public security and market regulation, a regular working mechanism shall be established to coordinate and mobilize resources, proactively prevent and properly handle issues related to virtual currency trading and speculation, and maintain economic and financial order and social harmony and stability.

III. Strengthen risk monitoring and early warning for virtual currency trading and speculation

(7) Conduct comprehensive monitoring and early warning. Each provincial people's government shall fully utilize local monitoring and early-warning mechanisms, combine online monitoring with offline investigations, and improve the accuracy and efficiency of identifying and detecting virtual currency trading and speculation. The People's Bank of China, the Cyberspace Administration of China and other departments shall continuously improve technical means for monitoring crypto-assets to achieve tracking across the entire chain of virtual currency 'mining', trading and exchange, together with continuous information backup. Financial regulatory authorities shall guide financial institutions and non-bank payment institutions in strengthening the monitoring of funds involved in virtual currency transactions.

(8) Establish information-sharing and rapid-response mechanisms. Under the leadership of each provincial people's government, local financial regulatory departments, together with branches of the State Council's financial regulatory authorities, cyberspace authorities, public security authorities and others, shall strengthen effective coordination among online monitoring, offline investigation and fund monitoring. They shall establish mechanisms for sharing and cross-checking information on virtual currency trading and speculation, as well as rapid-response mechanisms for transmitting, verifying and acting upon early-warning information.

IV. Establish a multidimensional, multilevel system for risk prevention and response

(9) Financial institutions and non-bank payment institutions must not provide services for business activities related to virtual currencies. They must not provide account opening, fund transfers, clearing, settlement or other services for such activities; include virtual currencies within the scope of assets accepted as collateral or pledges; conduct insurance business related to virtual currencies; or include virtual currencies within insurance coverage. Any indications of unlawful or non-compliant conduct discovered must be promptly reported to the relevant authorities.

(10) Strengthen the management of Internet information content and access related to virtual currencies. Internet enterprises must not provide online business premises, commercial displays, marketing, paid traffic referrals or other services for virtual currency-related business activities. They shall promptly report indications of unlawful or non-compliant conduct to the relevant authorities and provide technical support and assistance for relevant investigations and criminal inquiries. Based on leads referred by financial regulatory authorities, cyberspace and telecommunications authorities shall promptly close, in accordance with the law, websites, mobile applications, mini-programs and other Internet applications conducting virtual currency-related business activities.

(11) Strengthen the registration and advertising administration of market entities related to virtual currencies. Market regulation authorities shall strengthen the administration of market entity registration. The registered names and business scopes of enterprises and individual industrial and commercial households must not contain wording or content such as 'virtual currency', 'virtual assets', 'cryptocurrency' or 'crypto-assets'. Market regulation authorities, together with financial regulatory authorities, shall strengthen oversight of virtual currency-related advertising in accordance with the law and promptly investigate and deal with unlawful advertisements.

(12) Crack down on illegal financial activities related to virtual currencies. Upon discovering indications of such activities, local financial regulatory departments, together with branches of the State Council's financial regulatory authorities and other relevant departments, shall promptly investigate and determine their nature in accordance with the law, handle them appropriately, and rigorously pursue the legal liability of the legal persons, unincorporated organizations and natural persons concerned. Matters involving crimes shall be referred to the judicial authorities for investigation and handling in accordance with the law.

(13) Crack down on criminal activities involving virtual currencies. The Ministry of Public Security shall direct public security authorities nationwide to continue advancing the special campaigns against money laundering and cross-border gambling, and the 'Operation Card Break' campaign. They shall rigorously combat, in accordance with the law, illegal business operations, financial fraud and other crimes in virtual currency-related business activities; money laundering, gambling and other crimes committed using virtual currencies; and illegal fundraising, pyramid schemes and other crimes using virtual currencies as a selling point.

(14) Strengthen industry self-regulation. The National Internet Finance Association of China, the Payment & Clearing Association of China and the China Banking Association shall strengthen member management and policy communication, advocate and urge members to resist illegal financial activities related to virtual currencies, and discipline members that violate regulatory policies or industry self-regulatory rules in accordance with the relevant self-regulatory provisions. Various types of industry infrastructure shall be used to monitor risks arising from virtual currency trading and speculation, and leads shall be promptly referred to the relevant authorities.

V. Strengthen organization and implementation

(15) Strengthen organizational leadership and overall coordination. All departments and regions shall attach great importance to addressing risks from virtual currency trading and speculation, strengthen organizational leadership, clarify responsibilities, and establish a long-term working mechanism involving central coordination, local implementation, coordination between sectoral and territorial authorities, and shared responsibility. They shall maintain strong enforcement pressure, monitor risks dynamically, take effective measures to prevent and resolve risks, protect people's property in accordance with the law, and make every effort to maintain economic and financial order and social stability.

(16) Strengthen policy explanations, public communication and education. All departments, regions and industry associations shall make full use of the media and other communication channels to explain to the public the illegality, harmful effects and forms of business activities such as virtual currency speculation, including through explanations of laws and policies, analyses of typical cases and investment risk education, thereby increasing public awareness of risk prevention.

People's Bank of China; Cyberspace Administration of China; Supreme People's Court; 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 — 15 September 2021