China’s top financial and law enforcement agencies have convened to reaffirm and strengthen the nation’s prohibitive stance on cryptocurrencies, warning that speculative activity has resurfaced and poses new risks to financial stability.

The agencies made this reaffirmation during a high-level meeting on combating speculative cryptocurrency trading hosted by the People’s Bank of China (PBOC). The meeting was attended by officials from 13 government entities, including the Ministry of Public Security, the Cyberspace Administration of China, the Supreme People’s Court, and all major financial regulators.

According to a media release, the meeting noted that despite achieving “significant results” in previous crackdowns following the 2021 joint notice, “virtual currency speculation has resurfaced,” leading to related illegal and criminal activities that pose new challenges for risk prevention.

Following the issuance of the joint notice, Chinese agencies and law enforcement launched a nationwide crackdown on activities deemed illegal, including crypto mining. The crackdown saw China lose its market share of global bitcoin mining, resulting in the migration of companies to friendlier jurisdictions. However, these activities have picked up since the crackdown, with China reemerging as a top bitcoin mining nation amid a perceived softening of Beijing’s stance on crypto.

Read more: China Reemerges as Global Bitcoin Mining Power

However, in the Nov. 28 meeting, the key message emphasized by the central bank and coordination group was unambiguous: Virtual currencies do not have the same legal status as fiat currencies, lack legal tender status, and should not and cannot be used as currency in the market. Virtual currency-related business activities constitute illegal financial activities.

The meeting specifically highlighted stablecoins, noting they “currently cannot effectively meet requirements for customer identification and anti-money laundering,” posing a risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers.

To tackle the resurfacing chaos, the coordination mechanism requires all units to enhance coordination and cooperation between law enforcement and regulatory bodies. Policymakers are required to improve regulatory policies and the legal basis for enforcement. The ultimate goal is to “severely crack down on illegal and criminal activities, protect the property safety of the people, and maintain the stability of the economic and financial order.”

• What did China’s regulators decide? They reaffirmed the nationwide ban on cryptocurrency trading and related business activities.
• Why is the crackdown being reinforced? Speculative trading has resurfaced, creating new risks of crime and financial instability.
• Are virtual currencies recognized in China? No, they lack legal tender status and cannot be used as currency in the market.
• What risks were highlighted? Stablecoins pose AML concerns, with potential misuse for fraud and illegal cross-border transfers.

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