In the context of the ongoing evolution of the global cryptocurrency market, China and the United States are showing different emphases and progress in digital asset regulation. Recently, Shenzhen, China, issued a risk warning, clearly stating that digital currencies represented by stablecoins may give rise to illegal fundraising, gambling, fraud, and other criminal activities, emphasizing the principle of self-bear risk for illegal fundraising. Meanwhile, the U.S. is accelerating the construction of a digital asset regulatory framework, with the Senate holding hearings and releasing a draft proposal for market structure reform. At the same time, the U.S. Treasury Department has officially withdrawn its appeal against the sanctions on the cryptocurrency mixer Tornado Cash, which is seen as a signal of a softening regulatory environment in the U.S.

On July 7, the Office of the Special Task Force for Preventing and Combating Illegal Financial Activities in Shenzhen issued a risk warning, explicitly listing stablecoins as a type of digital currency that has recently attracted widespread market attention, and pointed out that they may be exploited by illegal organizations for illegal fundraising, gambling, fraud, pyramid schemes, money laundering, and other criminal activities.

Core of the risk warning: Shenzhen emphasized that such illegal organizations do not have the qualifications to publicly solicit public deposits without the legal permission of national financial management departments. They use new concepts like stablecoins for speculation, fabricating investment projects such as "virtual currency," "virtual assets," and "digital assets," publicly spreading false information and soliciting public funds.

Self-bear risk principle: The risk warning reiterated the provisions of the "Regulations on Preventing and Dealing with Illegal Fundraising," stating that "the state prohibits any form of illegal fundraising, and losses incurred by participants in illegal fundraising shall be borne by the participants themselves." This serves as a reminder for the public to enhance their rational investment awareness and avoid being deceived.

Reporting reward mechanism: Shenzhen encourages the public to report relevant organizations engaging in illegal fundraising under the guise of investing in stablecoins to the relevant departments in a timely manner, and rewards whistleblowers according to regulations.

This indicates that despite the increasing global attention on stablecoins, China remains highly vigilant and focuses on preventing potential financial risks and social stability issues they may bring.

In contrast to China's strict prevention of stablecoins, the U.S. is accelerating the construction of a digital asset regulatory framework and signaling a softening regulatory environment.

Senate hearings and legislative draft: This Wednesday, the Senate Banking Committee will hold hearings on establishing a $30 trillion regulatory framework for the digital asset industry and is expected to release a discussion draft of the market structure reform proposal later this week. This draft will incorporate certain provisions of the 2023 "Lummis-Gillibrand Responsible Financial Innovation Act" and draw on relevant provisions of the recently proposed "CLARITY Act" in the House of Representatives. Both the hearings and the draft release align with the committee's goal of introducing market structure legislation before the August recess.

Withdrawal of Tornado Cash sanctions: Nearly five months after the U.S. Treasury lifted sanctions against the cryptocurrency mixer Tornado Cash, the federal agency has now officially withdrawn its appeal. The U.S. Eleventh Circuit Court of Appeals has approved a joint motion from both parties to dismiss the appeal. Coin Center Executive Director Peter Van Valkenburgh confirmed that this joint motion marks the formal end of the court battle regarding the "legal basis for Tornado Cash sanctions," noting that the government has no intention of continuing to pursue and defend its "dangerously broad interpretation of sanction laws."

Background review: In April of this year, a U.S. court made a key ruling, overturning the sanctions against Tornado Cash and prohibiting the Office of Foreign Assets Control (OFAC) from sanctioning the mixer, ruling that OFAC's decision violated the Administrative Procedure Act.

Market reaction: In response to this favorable regulatory news, the price of Tornado Cash's native token TORN has risen.

Founder's dilemma: Although Tornado Cash has achieved a legal victory, its co-founder Roman Storm's legal troubles are far from over, as he still faces criminal trials for "conspiracy to launder money" and "evading sanctions," highlighting the ambiguous legal responsibilities of cryptocurrency developers.

The Treasury's abandonment of the appeal against Tornado Cash comes at a time when the U.S. digital asset regulatory stance shows signs of softening. The market generally expects that in the protracted Ripple v. SEC case, both sides may also withdraw their respective appeals. Meanwhile, the cryptocurrency industry is closely monitoring a series of legislation that may be introduced in the coming weeks, and the supportive signals released by the Trump administration have also enhanced market optimism regarding the loosening of cryptocurrency regulations.

China and the U.S. are showing different paths in cryptocurrency regulation. Mainland China focuses on preventing financial risks and combating illegal activities, maintaining high vigilance towards new concepts like stablecoins. In contrast, the U.S. is accelerating the construction of a more comprehensive digital asset regulatory framework and signaling a softening regulatory environment through actions like withdrawing the Tornado Cash sanctions appeal. This differentiated regulatory strategy will have a profound impact on the development of the global cryptocurrency market. Investors must closely monitor the dynamics of regulatory policies in various countries when participating in digital asset activities and fully recognize the opportunities and risks involved.

Related: Shenzhen issues warning on stablecoin fraud and illegal cryptocurrency fundraising.

Original article: “New Developments in China-U.S. Crypto Regulation: Shenzhen Warns of Stablecoin Risks, U.S. Treasury Officially Withdraws Tornado Cash Appeal”

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