Lawyers interpret the 1128 regulatory meeting: the focus is on cracking down on illegal foreign exchange and money laundering using stablecoins, not a policy shift.

PANews reported on December 1st that the People's Bank of China, along with several other departments, recently held a " Coordination Meeting on Combating Virtual Currency Trading and Speculation " (the 1128 Meeting), reiterating the policy of the September 24, 2021 notice prohibiting virtual currency business activities. The Xiao Sa Law Firm team pointed out that, as is well known, China has a relatively strict foreign exchange control system, generally limiting each person to no more than US$50,000 per year. With the gradual expansion of the stablecoin market, the continuous expansion of application scenarios, and the surge in the number of cryptocurrency traders, many outbound capital needs have been met by stablecoins such as USDT and USDC. Furthermore, some have used stablecoins to facilitate money laundering or conceal the proceeds of crime for upstream crimes. In judicial practice, there have even been instances of audacious foreign trade merchants using USDT and USDC to circumvent UN sanctions resolutions and assist sanctioned countries in their foreign trade. The focus of this meeting was: first, to guide judicial decisions back to a more lenient approach and curb the trend of courts treating cryptocurrency-related contracts leniently; and second, to severely crack down on serious violations such as illegal foreign exchange, money laundering, and assisting sanctioned countries in their trade using stablecoins such as USDT and USDC.

Furthermore, lawyer Xiao Sa believes that this meeting does not represent a policy shift, nor will it affect Hong Kong's open policy towards virtual assets. Currently, a pattern of "mainland restrictions, Hong Kong openness" has emerged, with a clear regulatory intent: financial innovation is permissible, but must be carried out compliantly within designated areas and frameworks. For mainland practitioners, it is crucial to remain vigilant against legal red lines, conduct business in compliance with regulations, and avoid any侥幸心理 (a sense of侥幸, or a belief that one can get away with something).