China does not have specific provision for crypto under the AML Regulation, because crypto is generally banned in China as you may see from the right column. | Cryptocurrency regulation in China has been relatively strict, with multiple crackdowns on various aspects of the industry. In December 2013, the People’s Bank of China (PBOC) and four other authorities jointly released the Circular on the Prevention of Risks from Bitcoin (关于防范比特币风险的通知), which mandated that all financial institutions must refrain from conducting business related to Bitcoin. In September 2017, the PBOC and other authorities issued the Announcement on Preventing Initial Coin Offering (ICO) Risks (关于防范代币发行融资风险的公告), highlighting that initial coins or virtual currencies do not possess legal status as official currencies and cannot circulate or be used as currency in the market. This Announcement also prohibits all forms of initial coin offering activities and exchange services for token financing and trading platforms. In September 2021, the PBOC and nine other central authorities released the Circular on Further Preventing and Resolving the Risks of Speculation in Virtual Currency Trading (“Circular 237”) (关于进一步防范和处置虚拟货币交易炒作风险的通知). Circular 237 is a significant regulatory document that aims to strengthen China’s approach to managing the risks associated with virtual currencies. Key provisions of Circular 237 include: - Emphasis of the illegality of virtual currency-related activities: The Circular emphasizes that virtual currencies do not possess legal status as official currencies in China, and declares that virtual currency related business activities are classified as illegal financial activities, including activities of exchanging legal currency with virtual currency, exchanging virtual currencies with each other, acting as a central counterparty for buying and selling virtual currencies, providing information intermediation and pricing services for virtual currency transactions, token issuance financing, and virtual currency derivative trading etc.
- Crackdown on offshore exchanges: Circular 237 also targets offshore virtual currency exchanges that provide services to Chinese residents. The authorities will monitor and block access to these platforms, as well as scrutinize and punish individuals or entities involved in facilitating such services.
- Prohibition of financial services for virtual currency transactions: The Circular explicitly prohibits financial institutions and payment service providers from offering any services related to virtual currency transactions. This includes services like account openings, registration, trading, clearing, and settlement, and financial institutions and payment service providers shall not include virtual currencies in the scope of collateral.
- Enhanced supervision and monitoring: The authorities will establish a coordination mechanism to strengthen supervision, monitoring, and early warning systems for risks associated with virtual currency trading and speculation. This is aimed at promptly identifying and mitigating potential risks.
- Strict enforcement and punishment: Circular 237 calls for the strict enforcement of relevant laws and regulations, including the punishment of individuals or entities found to be engaging in illegal virtual currency activities. It also encourages the public to report any suspicious activities related to virtual currencies.
Also in September 2021, the National Development and Reform Commission issued the Circular on Regulating Virtual Currency “Mining” Activities (整治虚拟货币 “挖矿” 活动的通知). This circular prohibits new virtual currency “mining” projects and mandates the accelerated withdrawal of existing projects. |
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