Source: CCTV News Client

Recently, there have been frequent speculative activities related to virtual currencies and the tokenization of real-world assets (RWA), disrupting the economic and financial order and endangering the property safety of the public.

Today, the People's Bank of China, the China Securities Regulatory Commission, and eight other departments jointly issued a notice titled "Notice on Further Preventing and Handling Risks Related to Virtual Currencies and Other Related Issues." What are the key points of this notice? Compared to the notice jointly issued by the central bank and ten departments in 2021, titled "Notice on Further Preventing and Handling Risks of Speculation in Virtual Currency Trading," also known as Document No. 237, what revisions and new explicit provisions are included in this notice? This article provides an interpretation.

No Units or Individuals Inside or Outside the Country May Issue RMB-Linked Stablecoins Abroad

The notice states that virtual currencies do not have the same legal status as legal tender. Virtual currencies such as Bitcoin, Ethereum, and Tether do not have legal compensation and should not and cannot circulate as currency in the market.

Regarding the recently popular stablecoins, the notice also makes a provision for the first time: Without the legal approval of relevant departments, no units or individuals inside or outside the country may issue RMB-linked stablecoins abroad.

Activities Related to Virtual Currencies Are Considered Illegal Financial Activities

The People's Bank of China stated that virtual currencies currently cannot effectively meet requirements for customer identity verification, anti-money laundering, and other aspects, posing risks of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers. The notice clarifies that a prohibitive policy is maintained regarding virtual currencies within the country, and all activities related to virtual currencies are considered illegal financial activities and are strictly prohibited and resolutely banned by law.

What specific activities are considered related to virtual currencies? The notice mentions: Engaging in exchange services between legal tender and virtual currencies, exchanges between virtual currencies, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency trading, token issuance financing, and trading of financial products related to virtual currencies, as well as illegal activities such as the illegal sale of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures businesses, and illegal fundraising, are all strictly prohibited and resolutely banned by law. Overseas units and individuals are not allowed to illegally provide virtual currency-related services to domestic entities in any form.

Due to the reliance of virtual currencies on blockchain technology, which supports peer-to-peer transactions and breaks through the physical concept of "national borders," related risks can easily transmit across borders. The notice explicitly states for the first time that without the legal approval of relevant departments, domestic entities and their controlled overseas entities are not allowed to issue virtual currencies abroad.

Engaging in RWA Activities Within the Country Is Considered Illegal Financial Activity

This time, the notice also clarifies the concept and connotation of the tokenization of real-world assets (RWA) and emphasizes that engaging in RWA activities and providing related intermediary and information technology services within the country are considered illegal financial activities.

The tokenization of real-world assets (RWA) refers to the use of cryptographic technology and distributed ledgers or similar technologies to convert ownership, income rights, and other rights into tokens or other rights and debt certificates with token characteristics, and to engage in issuance and trading activities.

The notice clearly states that engaging in the tokenization of real-world assets within the country, as well as providing related intermediary and information technology services, is suspected of illegal activities such as the illegal sale of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures businesses, and illegal fundraising, and should be prohibited; except for related business activities conducted with the legal approval of the competent business department based on specific financial infrastructure. Overseas units and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.

Ongoing Crackdown on Virtual Currency "Mining" Activities

The notice also clarifies that the National Development and Reform Commission, in conjunction with relevant departments, will strictly control virtual currency "mining" activities, comprehensively review and shut down existing virtual currency "mining" projects, prohibit the establishment of new "mining" projects, and prohibit "mining machine" manufacturers from providing various services such as "mining machine" sales within the country.

Maintaining a High-Pressure Stance Against Illegal Activities Related to Virtual Currencies and RWAs

The notice mentions that since last year, the speculative atmosphere in the virtual currency and RWA markets has risen, and some criminals have taken the opportunity to engage in illegal activities such as illegal fundraising and pyramid schemes under the guise of virtual currencies, RWAs, and mining, or have used virtual currencies to transfer illegal gains, seriously harming the property safety of the public and disrupting the normal economic and financial order. The notice reiterates that cross-departmental cooperation will be strengthened, central-local collaboration will be enhanced, and regulatory requirements for risk monitoring, prevention, and handling will be further improved, maintaining a high-pressure stance against illegal activities related to virtual currencies and RWAs.

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