The Regulatory Evolution and Policy Characterization of Virtual Currencies in Chinese Mainland
In Chinese Mainland, regulatory policies on virtual currencies have undergone a process of gradual tightening. As early as December 2013, five ministries including the People's Bank of China (PBOC) issued the Notice on Preventing Bitcoin Risks, explicitly defining Bitcoin as a specific virtual commodity that does not possess the same legal status as fiat currency and cannot circulate and be used in the market as currency.
Since then, as market risks became exposed, regulation was further upgraded. On September 24, 2021, ten departments including the central bank jointly issued the Notice on Further Preventing and Disposing of Risks in Virtual Currency Trading and Speculation (referred to as the "September 24 Notice"). The notice explicitly stipulates that business activities related to virtual currencies are illegal financial activities. Any legal person, unincorporated organization, or natural person investing in virtual currencies and related derivatives violates public order and good morals, and the related civil legal acts are invalid, with losses arising therefrom to be borne by themselves. Meanwhile, overseas virtual currency exchanges providing services to residents within Chinese territory via the internet also constitute illegal financial activities.
Is Personal Holding and Trading of Virtual Currencies Legal?
In legal practice, the definition of participating in virtual currency-related behaviors requires distinguishing between different scenarios and operations:
- Mere Holding: From the perspective of civil law, virtual currencies are viewed to a certain extent as online virtual property. The lawful acquisition and mere holding of virtual currencies by individuals generally do not directly violate criminal laws, and their property rights will also receive a certain degree of civil law protection under specific circumstances. However, this does not mean that the state provides a credit endorsement or backstop for their investment value.
- Trading and Commercial Activities: Because the "September 24 Notice" characterizes virtual currency-related business activities as illegal financial activities, the domestic launch of token issuance financing, virtual currency exchange services, and virtual currency-fiat currency exchanges are all explicitly prohibited.
When conducting relevant asset verification or understanding market trends, investors can monitor policy dynamics and industry risk warnings on information platforms such as Svmuu to avoid falling into compliance quagmires due to information asymmetry.
Criminal Risks of Over-the-Counter (OTC) Trading and Fiat On/Off-Ramps
Although mere holding is not illegal, frequently participating in over-the-counter (OTC) trading faces extremely high legal and criminal risks. In practice, many participants use bank cards to buy and sell stablecoins such as USDT:
- If the counterpart's funds involve illicit or fraudulent activities, the individual's bank card is highly susceptible to being frozen by public security organs in accordance with the law.
- If one assists others in transferring funds through high-frequency, large-volume, and profit-making exchanges, it easily triggers the crimes of money laundering, concealing and hiding the proceeds of crime, illegal business operations, or the crime of helping information network criminal activities (Help-Information Network Crime) under the Criminal Law.
Overall, Chinese Mainland adopts a strict preventive and crackdown stance against virtual currencies. Ordinary residents should recognize the compliance risks of these gray areas, refrain from blindly trusting so-called "guaranteed profit" promotions, and consciously stay away from illegal financial activities related to virtual currencies.
