China imposes strict bans on virtual currencies

China

On 15 September 2021, the People's Bank of China, the Cyberspace Administration of China and eight other authorities jointly issued the 'Notice on Further Preventing and Disposing of Risks in Virtual Currency Trading and Speculation', which states that virtual currencies, such as Bitcoin, Ethereum and Tether, are not legal tender and cannot be circulated in the market as legal tender.

The following activities are considered illegal financial activities and will be strictly prohibited:

  • conducting a virtual currency exchange between legal tender and a virtual currency or between virtual currencies;

  • trading a virtual currency as a central counterparty; and

  • provision of matching services for virtual currency transactions.

In particular, the provision of services by overseas virtual currency exchanges to Chinese residents through the Internet is also considered an illegal financial activity.

Financial institutions and non-bank payment institutions are prohibited from providing account openings, fund transfers, clearance or settlement services for virtual currency-related business. They are also prohibited from accepting virtual currency as collateral, including virtual currency in the scope of insurance liability, or carrying out other insurance business related to a virtual currency.

Internet companies are prohibited from providing an online business environment, commercial display, marketing promotion, payment processing or other online services for virtual currency-related business.

If an internet company identifies any clues of violations of illegal virtual currency related activities, it must promptly report this activity to the relevant authorities and provide technical support and assistance for the related investigations.

The notice also bans certain phrases from appearing in the names of registered market entities. The registered names, the business scope of enterprises, and the contents of any advertisements “must not contain words or content”, such as virtual currency, virtual asset, encrypted currency or encrypted asset.

In addition, financial fraud, money laundering, gambling, illegal fund-raising and pyramid schemes involving virtual currencies will be a focus of enforcement actions of the public security authorities.

Please click here for the full text (Chinese only) of the notice.

For more details on this Notice, China's currency laws and China's cyber regulations, contact your CMS client partner or local CMS experts: