The People's Bank of China and seven other government departments: Virtual currency does not have the same legal status as statutory currency, and the ongoing crackdown on virtual currency "mining" activities.

On February 6, the People's Bank of China and seven other departments issued a notice on further preventing and addressing risks related to virtual currencies. The notice pointed out that virtual currencies do not have the same legal status as fiat currencies. Virtual currencies such as Bitcoin, Ethereum, and Tether have the main characteristics of being non-monetary authorities issued, using encryption technology and distributed ledger or similar technology, existing in digital form, and not having legal tender status. Therefore, they should not and cannot be used as currency in the market. Activities related to virtual currencies are considered illegal financial activities, including exchanging legal tender with virtual currencies, exchanging virtual currencies among themselves, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency trading, token issuance financing, and trading of virtual currency-related financial products. All these activities are strictly prohibited as they are suspected of engaging in illegal financial activities such as illegally issuing tokens, unauthorized public offering of securities, illegal operation of securities and futures business, and illegal fundraising. Foreign entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form. Stablecoins pegged to fiat currencies indirectly perform some functions of fiat currencies in circulation. Without the approval of relevant departments in accordance with laws and regulations, any domestic and foreign entity or individual is not allowed to issue stablecoins pegged to the Chinese yuan outside China. The notice also emphasized the ongoing crackdown on virtual currency mining activities. The National Development and Reform Commission and relevant departments will strictly control virtual currency mining activities and continue to promote the rectification of such activities. Provincial governments are responsible for the rectification of mining activities in their administrative regions. They are required to comprehensively review and shut down existing mining projects involving virtual currencies, prohibit new mining projects, and prohibit mining companies from providing mining machine sales and other services within China. In addition, the notice highlighted the tokenization of real-world assets, which involves using encryption technology and distributed ledgers to transform ownership, profit rights, etc., into tokens or other token-like interests, bonds, and certificates for issuance and trading activities. Any activities related to the tokenization of real-world assets and the provision of intermediary and information technology services in China are also subject to strict regulation and approval by relevant departments. The notice further stressed the need to strengthen internet content and access management. Internet companies are prohibited from providing online operating venues, commercial displays, marketing promotions, and paid traffic guidance for virtual currencies, real-world asset tokenization, and related business activities. They are required to report any illegal activities promptly to relevant departments and provide technical support and assistance for related investigations and inspections. Internet, telecommunications, and public security authorities are mandated to close and dispose of websites, mobile applications (including mini-programs), as well as public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the financial management department's referrals. Officials from the People's Bank of China and the China Securities Regulatory Commission provided answers to questions from journalists regarding the notice. It was emphasized that China has maintained a prohibition on virtual currency-related business activities for a long time. In 2013, five departments, including the People's Bank of China, jointly issued a notice on preventing Bitcoin-related risks, clearly stating that Bitcoin is a specific virtual commodity and should not be used as currency in the market. The notice issued in 2021 further clarified that Bitcoin, Ethereum, and stablecoins like Tether do not have the same legal status as fiat currencies and are considered illegal financial activities when conducted within China. Overall, the notice provided comprehensive measures to prevent and address risks related to virtual currencies and the tokenization of real-world assets, highlighting the importance of adhering to regulatory policies and cracking down on illegal financial activities in the virtual currency space.