Virtual Currency Issuance Overseas Blocked
The Chinese government has announced stronger measures to control virtual currencies, including a ban on issuing yuan-denominated stablecoins overseas without prior approval from the authorities.
According to the website of the People's Bank of China, the country's central bank, on the 6th (local time), the People's Bank of China and seven other ministries and agencies recently jointly issued a notice titled "Further Preventing and Handling Risks Related to Virtual Currencies" that includes these measures. The authorities stated, "Without the lawful consent of the relevant authorities, no domestic or foreign company or individual may issue yuan-pegged stablecoins overseas."
Stablecoins promote themselves as being more stable than general virtual currencies by pegging their value to real assets such as the U.S. dollar or the yuan. The authorities explained that if yuan stablecoins are used in the market, they would in effect perform part of the function of legal tender in an irregular way, which is related to China's monetary sovereignty.
Through this notice, the authorities also stated that, "Without the lawful consent of the relevant authorities, entities within China, or offshore entities under their control, must not issue virtual currencies overseas." Because virtual currencies are based on blockchain technology and transcend the concept of national borders, associated risks can easily spread across borders, which is why central banks and international financial institutions around the world are maintaining a cautious stance, they said.
In addition, the authorities said that this notice clearly reaffirms the existing policy of prohibiting virtual currencies. Since businesses related to virtual currencies fall under illegal financial activities, they are strictly prohibited without exception. The authorities also reconfirmed that it is prohibited for overseas companies or individuals to illegally provide virtual currency-related services to entities in China. They noted that, at the current stage, virtual currencies cannot effectively ensure user identity verification or anti-money laundering controls, and therefore can be used for money laundering, fraud, and illegal cross-border remittances.
China had already stated in 2013 that Bitcoin is a virtual commodity and therefore must not be circulated or used as currency in the market, and in 2021 it pointed out that virtual currencies do not have the same legal status as legal tender and that all virtual currency-related businesses in China constitute illegal financial activities.
The authorities also said they will continue rectifying virtual currency mining activities. Regarding the background to this announcement, they stated that speculative activities related to virtual currencies and the tokenization of real-world assets (RWA) have sporadically occurred, disrupting economic and financial order and undermining the safety of Chinese citizens' assets. They added that these measures have been introduced to improve supervisory and regulatory policies, to prevent and address related risks, and to safeguard national security and social stability.
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