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On the evening of September 24, the National Development and Reform Commission and the central bank issued a series of notices to regulate mining and virtual currency trading speculation. After the notice was issued, the crypto market plummeted.
Among them, the National Development and Reform Commission and other departments issued a notice on rectifying virtual currency "mining" activities, mentioning strengthening the dual control constraints on energy consumption of new virtual currency "mining" projects.
The notice also pointed out that virtual currency "mining" activities will be listed as an eliminated industry. It is strictly forbidden to carry out virtual currency "mining" activities in the name of data centers. Strengthen the credit supervision of data center companies. Strictly restrict the electricity application and energy consumption of virtual currency "mining" companies. It is strictly forbidden to provide financial and tax support for new virtual currency "mining" projects.
In addition, we must speed up the orderly withdrawal of existing projects and investigate and punish illegal and irregular power supply behaviors in accordance with the law. Implement differentiated electricity prices. Do not allow virtual currency "mining" projects to participate in the electricity market. Stop all financial and tax support for virtual currency "mining" projects. Stop providing financial services to virtual currency "mining" projects. Eliminate them within a time limit as stipulated in the "Guidelines for Industrial Structure Adjustment".
In addition, on the evening of the 24th, ten departments including the People's Bank of China, the Cyberspace Administration of China, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange issued a notice on further preventing and dealing with the risks of virtual currency trading speculation.
The notice emphasizes that virtual currency does not have the same legal status as legal currency. Virtual currency-related business activities are illegal financial activities. Virtual currency-related business activities such as conducting legal currency and virtual currency exchange business, virtual currency exchange business, buying and selling virtual currency as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and virtual currency derivatives transactions are suspected of illegal financial activities such as illegal issuance of token tickets, unauthorized public issuance of securities, illegal futures business, and illegal fundraising. They are strictly prohibited and resolutely banned in accordance with the law. Those who conduct related illegal financial activities that constitute a crime shall be held criminally liable in accordance with the law.
The provision of services to residents in my country through the Internet by overseas virtual currency exchanges is also an illegal financial activity. Domestic staff of relevant overseas virtual currency exchanges, as well as legal persons, non-legal organizations and natural persons who knowingly or should have known that they are engaged in virtual currency-related businesses and still provide them with marketing, payment settlement, technical support and other services, shall be held accountable in accordance with the law. There are legal risks in participating in virtual currency investment and trading activities.
After the notice was issued, relevant officials of the People's Bank of China answered reporters' questions on related issues and further pointed out that virtual currency-related businesses such as 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 trading are all illegal financial activities and are strictly prohibited and resolutely banned in accordance with the law; overseas virtual currency exchanges providing services to residents in my country through the Internet are also illegal financial activities.
In fact, since 2017, risk prevention and control and regulatory policies regarding cryptocurrencies have been released, and relevant supervision has been continuously strengthened.
2017: Guarding against the risks of token issuance and financing
On September 4, 2017, the People's Bank of China, the Central Cyberspace Affairs Commission, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission and other seven departments jointly issued the "Notice on Preventing the Risks of Token Issuance and Financing", announcing that token issuance and financing is defined as unauthorized illegal public financing, suspected of illegal sale of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities. ICO and new projects are prohibited, and existing projects must be cleared within a time limit, that is, any token issuance and financing activities are clearly prohibited, and all ICO token trading platforms must clear and close transactions before the end of the month.
The announcement specifically mentioned: accurately understand the essential attributes of token issuance and financing activities. The tokens or "virtual currencies" used in token issuance and financing are not issued by monetary authorities, do not have monetary attributes such as legal compensation and compulsory nature, do not have the same legal status as currency, and cannot and should not be circulated and used as currency in the market; no organization or individual may illegally engage in token issuance and financing activities; strengthen the management of token financing trading platforms; financial institutions and non-bank payment institutions shall not carry out businesses related to token issuance and financing transactions; the public should be highly vigilant about the risks of token issuance, financing and transactions; and give full play to the self-discipline of industry organizations.
2018: Guard against disguised ICO, illegal fundraising, and virtual currency trading risks
On January 12, 2018, the China Internet Finance Association issued a "Risk Warning on Preventing Disguised ICO Activities", warning users that they can choose to report or file a police report on disguised ICOs. The China Internet Finance Association calls on consumers and investors to recognize the nature of the relevant model, enhance risk prevention awareness, invest rationally, and not blindly follow the hype. For the IMO model and various types of ICO and "virtual currency" trading venue services that continue to be provided to domestic residents through the deployment of overseas servers, if any illegal financial activities are found, they can be reported to the relevant regulatory authorities or the China Internet Finance Association. If any of them are suspected of illegal crimes, they can be reported to the public security organs. Members of the China Internet Finance Association should strengthen self-discipline, resist illegal financial activities, and not participate in any activities involving ICO or speculation in "virtual currency".
On August 24, 2018, the five departments of China Banking and Insurance Regulatory Commission, the Central Cyberspace Affairs Commission, the Ministry of Public Security, the People's Bank of China, and the State Administration for Market Regulation issued the "Risk Warning on Preventing Illegal Fund Raising in the Name of "Virtual Currency" and "Blockchain", stating that recently some criminals have been raising funds by issuing so-called "virtual currency", "virtual assets" and "digital assets" under the banner of "financial innovation" and "blockchain", infringing on the legitimate rights and interests of the public. Such activities are not truly based on blockchain technology, but are actually illegal fundraising, pyramid schemes, and fraud by hyping the concept of blockchain. The five departments remind the general public that such activities use "financial innovation" as a gimmick, but are actually Ponzi schemes of "borrowing new to repay old", and it is difficult to maintain the long-term operation of funds. Please treat blockchain rationally, do not blindly believe in the exaggerated promises, establish correct monetary concepts and investment concepts, and effectively enhance risk awareness.
On September 18, 2018, the Shanghai Headquarters of the People's Bank of China and the Shanghai Financial Services Office issued the "Continuous Prevention of ICO and Virtual Currency Trading Risks" announcement, warning of virtual currency trading risks. It mentioned that in recent years, virtual currency-related speculation has been prevalent, prices have skyrocketed and plummeted, and risks have accumulated rapidly, seriously disrupting the economic, financial and social order. ICO financing entities are mixed, and are essentially an act of illegal public financing without approval, suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities. The announcement stated that in order to maintain financial stability, the National Internet Financial Risk Special Rectification Leading Group made a decisive decision last year to clean up and rectify ICO and virtual currency trading venues, and promptly issued the "Announcement on Preventing Token Issuance and Financing Risks" to control related risks in the embryonic stage.
2019: Guard against the risks of ICO and "virtual currency" trading activities in the name of blockchain
On January 10, 2019, the Cyberspace Administration of China promulgated the "Blockchain Information Service Management Regulations". On January 28, 2019, the "Blockchain Information Service Registration Management System" of the Cyberspace Administration of China was put into operation. In October 2019, the 14th meeting of the Standing Committee of the 13th National People's Congress voted to pass the "Cryptography Law of the People's Republic of China".
On December 13, 2019, the official WeChat account of the Internet Finance Association of China issued a "Risk Warning on Preventing ICO and "Virtual Currency" Trading Activities in the Name of Blockchain", solemnly reminding that all member institutions should strictly abide by national laws and regulatory requirements, abide by industry self-discipline requirements, actively resist illegal financial activities, and not participate in any hype involving ICO and "virtual currency" trading activities.
On December 27, 2019, the Beijing Local Financial Regulatory Bureau, the Business Management Department of the Central Bank, the Beijing Banking and Insurance Regulatory Bureau, and the Beijing Securities Regulatory Bureau jointly issued the "Risk Warning on Further Preventing "Virtual Currency" Trading Activities". The risk warning stated that with the recent promotion of blockchain technology, virtual currency trading activities have shown signs of resurgence in China. Some virtual currency trading platforms provide virtual currency trading services to domestic residents and launch zero-interest loans, dual-currency financial management and other projects through digital currency mortgages, which seriously violates the "Notice on Preventing the Risks of Token Issuance and Financing" issued by the People's Bank of China and other seven ministries and commissions, and is suspected of engaging in illegal financial activities.
2020: Guard against the risks of speculation on overseas virtual currency trading platforms
On April 2, 2020, the China Internet Finance Association issued a "Risk Warning on Participating in Speculation and Hype on Overseas Virtual Currency Trading Platforms", reminding that in order to evade regulatory crackdowns, some virtual currency trading platforms register or set up servers overseas and continue to engage in related activities. The China Internet Finance Association solemnly reminds: Any institution and individual should strictly abide by national laws and regulatory regulations and not participate in virtual currency trading activities and related speculative behaviors. Member institutions should also abide by industry self-discipline requirements, actively resist illegal financial activities, and not provide convenience for them. Consumers should take the initiative to enhance their awareness of risk prevention and self-protection, and not blindly follow the trend to participate in related speculative behaviors. If any institution is found to be involved in such illegal financial activities, it should be reported to the relevant regulatory authorities or the China Internet Finance Association in a timely manner. If any institution is suspected of committing a crime, it should be reported to the public security organs in a timely manner.
2021: Crackdown on Bitcoin Mining and Trading
On May 18, 2021, the Internet Finance Association of China, the China Banking Association, and the China Payment and Clearing Association issued the "Announcement on Preventing the Risk of Virtual Currency Trading Speculation", reiterating that the recent surge and plunge in virtual currency prices and the rebound in virtual currency trading speculation have seriously infringed on the property safety of the people and disrupted the normal order of the economy and finance. The "Announcement" requires that member units such as financial institutions and payment institutions shall not use virtual currency to price products and services, shall not underwrite insurance business related to virtual currency or include virtual currency in the scope of insurance liability, and shall not directly or indirectly provide customers with other virtual currency-related services. The "Announcement" also pointed out that virtual currency has no real value support, and its price is extremely easy to manipulate. Related speculative trading activities have multiple risks such as false asset risks, business failure risks, and investment speculation risks. "From the existing judicial practice in my country, virtual currency trading contracts are not protected by law, and the consequences and losses caused by investment transactions shall be borne by the relevant parties themselves."
On May 21, 2021, the Financial Stability and Development Committee of the State Council (hereinafter referred to as the Financial Committee) held its 51st meeting to study and deploy key tasks in the financial field in the next stage. The meeting was chaired by Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Director of the Financial Committee, and attended by relevant responsible comrades from the member units of the Financial Committee. The meeting pointed out that the financial system has resolutely implemented the decisions and deployments of the CPC Central Committee and the State Council, increased support for the real economy, and the prudent monetary policy is flexible and moderate. The credit policy accurately adapts to the needs of market entities, liquidity remains reasonably abundant, the level of financial services has been improved, and financial support for epidemic prevention and control and economic and social development has achieved significant results. The meeting called for resolute prevention and control of financial risks. Adhere to the bottom line thinking, strengthen the all-round scanning and early warning of financial risks, promote the reform and risk reduction of small and medium-sized financial institutions, focus on reducing credit risks, strengthen the supervision of platform enterprises' financial activities, crack down on Bitcoin mining and trading, and resolutely prevent individual risks from being transmitted to the social field. It is necessary to maintain the smooth operation of the stock, bond and foreign exchange markets, severely crack down on securities violations, and severely punish financial crimes.
It is worth mentioning that after the meeting, Xinjiang, Inner Mongolia, Qinghai, Yunnan, Sichuan and other provinces successively introduced regulatory policies on virtual currency mining.
On September 3, 2021, the central bank released the "China Financial Stability Report (2021)". In the outlook section of the report, it is mentioned that the rectification work in areas such as virtual currency transactions has been basically completed and has been transferred to normalized supervision. (Golden Finance)
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