China confirms that all cryptocurrencies and stablecoins have no legal status

China’s central bank has reiterated its hardline stance against cryptocurrencies and stablecoins, declaring that all “virtual assets” lack legal status and renewing pledges to intensify its crackdown on related activities.

At a high-level coordination meeting held on November 28, the People’s Bank of China (PBOC) declared that virtual currencies, including stablecoins, cannot be used as legal tender, and that any trading or financial operations involving them are considered illegal financial activities.

Some of the prominent figures who attended this event included the Ministry of Public Security, the Cyberspace Administration of China, as well as the Central Financial Stability and Development Office and the Supreme People’s Court. 

The PBOC cautions on the reappearance of virtual currency speculation 

As the meeting progressed, the central bank acknowledged that all groups had demonstrated their commitment to strictly adhering to the decisions of the CPC Central Committee and the State Council over the past few years.

It also pointed out that these groups have applied strict measures against virtual currency trading and speculation in accordance with a “Notice on Further Preventing and Handling Risks of Virtual Currency Trading and Speculation.” The People’s Bank of China, in collaboration with ten other departments, issued this regulation in 2021.

Notably, this official government notice, which is considered a crucial administrative notice in the Chinese legal system, clearly outlines certain activities, such as trading and exchanging virtual currency, as illegal financial actions. It also warns against transactions related to virtual currency, noting them as unsafe under the law.

With all groups following this regulation, the central bank noted that this move has enabled the resolution of challenges in the virtual currency market, leading to significant accomplishments.

However, sources close to the situation cautioned that the PBOC believes that virtual currency speculation has recently returned. This announcement stirred tension among individuals, who raised concerns about the presence of illegal activities that pose new challenges for managing risks effectively.

During the meeting, officials attempted to address this controversy by arguing that virtual currencies do not possess a similar legal status to that of traditional money. Additionally, they claimed that virtual currencies lack the status of legal tender and that they should not be treated as currency in the marketplace.

Their argument also affected activities linked to virtual currencies, as they were viewed as illegal financial operations. To further support their argument, they stated that stablecoins, a form of virtual currency, do not meet the requirements for identifying clients and preventing money laundering cases. 

This, therefore, raised concerns about how criminals might use them to carry out illegal activities such as fundraising scams, unlawful cross-border fund transfers, and money laundering.

The central bank urges all organizations to apply measures against virtual currencies

As they concluded the meeting, all organizations were urged to adhere to the guidance of Xi Jinping’s ideas on Socialism with Chinese Characteristics for a New Era. They were also required to fully implement the spirit of the 20th National Congress of the Communist Party of China and its subsequent meetings. 

To address the challenges faced in the financial sector, the central bank reminded participants that measures for risk prevention and control should remain as their main focus. 

For virtual currencies, the PBOC declared that policies against virtual currencies and actions to target illegal financial activities related to them must be actively implemented.

To effectively address the challenges associated with virtual currencies, the central bank emphasized the need for improved teamwork practices and collaboration. It also highlighted that every organization needs to shift its focus towards key areas, such as how information and money move, enhance its rules and laws, share information more effectively, and strengthen its monitoring skills.

Apart from this, they were required to take strong action against illegal and criminal activities, ensure economic and financial stability, and protect people’s property rights.

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