Cailianshe: Virtual currency is being “cut off from the bottom” by regulatory authorities! The underlying development chain has been completely cut off

The regulatory policies related to virtual currencies have been upgraded again. On the 24th, the central bank and the National Development and Reform Commission jointly issued documents with multiple departments to severely crack down on virtual currency trading speculation and "mining" activities.

The central bank and ten other departments pointed out in the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (hereinafter referred to as the "Central Bank Notice") that virtual currency exchange, buying and selling virtual currencies as a central counterparty, providing matchmaking services for virtual currency transactions, token issuance financing, and virtual currency derivatives transactions are all illegal financial activities, which are strictly prohibited and resolutely banned in accordance with the law. In addition, overseas virtual currency exchanges providing services to residents in my country through the Internet are also illegal financial activities.

In the "Notice on the Rectification of Virtual Currency "Mining" Activities" (hereinafter referred to as the "NDRC Notice"), the National Development and Reform Commission and other departments listed virtual currency "mining" activities as an eliminated industry for the first time, and required local governments to sort out and investigate existing and newly built virtual currency "mining" projects and establish a project list. At the same time, all financial support and financial services for virtual currency "mining" projects were stopped.

Industry insiders pointed out that these two documents will cut off the underlying development links of virtual currencies, rectify the virtual currency-related industries from the top-level design, and systematize the regulatory measures, revealing the regulator's determination to maintain a high-pressure situation on the industry. In addition, many industry insiders expect that the regulatory authorities will further improve the legal system for virtual currency supervision and clarify the legal responsibilities of various behaviors.

Foreign exchanges providing services within the country are also illegal financial activities

The central bank's "Notice" once again emphasized that virtual currency-related business activities are illegal financial activities. This includes not only domestic virtual currency-related activities, but also overseas virtual currency exchanges that provide services to residents in my country through the Internet, which are also defined as "illegal financial activities."

The central bank's "Notice" pointed out that domestic staff of relevant overseas virtual currency exchanges, as well as legal persons, non-legal organizations and natural persons who know or should know that they are engaged in virtual currency-related businesses and still provide them with marketing, payment settlement, technical support and other services, will be held accountable according to law.

"The central bank has previously cleaned up and rectified domestic exchanges, and there are still some foreign exchanges trying to enter the Chinese market." An industry insider told Cailianshe reporters that even with the high-pressure domestic supervision this year, there are still a few foreign exchanges trying to enter the Chinese market.

In order to strengthen the monitoring and early warning of virtual currency trading speculation risks, the People's Bank of China, the Central Cyberspace Affairs Commission and other departments will continue to improve the technical means of monitoring encrypted assets, and realize the full-chain tracking and full-time information backup of virtual currency "mining", trading and exchange. Financial management departments will guide financial institutions and non-bank payment institutions to strengthen the monitoring of funds involved in virtual currency transactions.

Virtual currency "mining" is listed as an eliminated industry

In addition to using financial means to comprehensively restrict virtual currency, the National Development and Reform Commission and other departments have also listed virtual currency "mining" as an industry to be eliminated.

According to the NDRC's "Notice", "virtual currency 'mining' activities" will be added to the "elimination category" of the "Guidelines for Industrial Structure Adjustment (2019 Edition)". Before the addition, virtual currency "mining" projects will be treated as eliminated industries, and investment will be prohibited in accordance with the relevant provisions of the "Decision of the State Council on Issuing and Implementing the <Interim Provisions on Promoting Industrial Structure Adjustment>".

In fact, since the beginning of this year, many places such as Sichuan and Inner Mongolia have begun to clean up and rectify virtual currency "mining" within their jurisdictions, but from the perspective of national unified supervision, this is the first time that the regulators have listed virtual currency "mining" as an eliminated industry.

Wang Pengbo, a senior analyst in the financial industry at Broadcom Consulting, believes that "mining" is the underlying industry of virtual currency. The NDRC and other departments have issued a document again, which is equivalent to cutting off the underlying development link of virtual currency. Compared with the previous reliance on market self-regulation, the NDRC's "Notice" this time is to clean up and rectify related industries by administrative means, which means that my country's supervision of virtual currency-related industries has been upgraded again.

At the same time, the NDRC's "Notice" also prohibits the application and connection of new virtual currency "mining" projects, strictly reviews the electricity application business, and requires that power shall not be supplied to virtual currency "mining" enterprises under any name, and all applications for application shall be stopped. In addition, local governments, financial institutions, non-bank payment institutions, etc. are strictly prohibited from supporting new virtual currency "mining" projects in any form of finance, taxation, etc. New virtual currency "mining" projects are not allowed to be introduced into government-led industrial parks.

The National Development and Reform Commission believes that virtual currency "mining" refers to the process of calculating and producing virtual currency through special "mining machines". It consumes a lot of energy and emits a lot of carbon, has a low contribution to the national economy, and has a limited role in driving industrial development and scientific and technological progress. In addition, the risks derived from the production and trading of virtual currency are becoming more and more prominent. Its blind and disorderly development has an adverse impact on promoting high-quality economic and social development and energy conservation and emission reduction. Therefore, regulating virtual currency "mining" activities is of great significance to promoting the optimization of my country's industrial structure, promoting energy conservation and emission reduction, and achieving carbon peak and carbon neutrality goals as scheduled.

The legal responsibilities of relevant personnel should be further clarified

"The central bank's 'Notice' mainly strictly regulates virtual currencies from a financial perspective, while the 'Notice' of the National Development and Reform Commission strengthens the cleanup and rectification efforts from an industrial perspective, which means that the regulatory authorities have established a systematic top-level design." Dong Ximiao, chief researcher of China United Network Communications Finance, predicts that the regulatory authorities will continue to maintain a high-pressure stance on virtual currency-related industries in the future.

However, Dong Ximiao said that from the perspective of the legal system, there is no legal document on participating in virtual currency activities. He believes that the responsibilities of citizens participating in virtual currency activities should be further clarified in the future, such as the Supreme People's Court, the Supreme People's Procuratorate and other departments may issue relevant judicial interpretations in the future.

Che Ning, deputy director of the Center for Rule of Law and Sustainable Development Research at China University of Political Science and Law, also said that the issuance of the two documents today has filled most of the regulatory loopholes in virtual currency-related activities. However, the legal responsibilities of relevant personnel in different situations still need to be further clarified.

"For example, the central bank's 'Notice' lists overseas exchanges providing services to the domestic market as illegal financial activities, which will involve different situations such as domestic persons operating overseas platforms and overseas persons providing services to the domestic market. 'Mining' also involves problems such as Chinese citizens participating in mining abroad. How to define the legal responsibilities of cross-border personnel remains to be discussed." Che Ning said that in the future, China should also strengthen international judicial cooperation to jointly combat related illegal activities.