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In brief

On 15 September 2021, the People’s Bank of China (PBOC), together with nine other governmental departments, jointly issued the Notice on Further Preventing and Handling the Risk of Speculation in Virtual Currency Transactions (“Notice“).1 We provide a briefing on the Notice, its background and impact in this alert.


In recent years, the booming speculation in trading of cryptocurrencies, such as bitcoin, has disrupted the economic and financial order, and bred illegal and criminal activities such as money laundering, illegal fund-raising, fraud and pyramid sales, which seriously endanger Chinese people’s property safety. According to the decisions and arrangements of the CPC Central Committee and the State Council, the PBOC, together with relevant departments, has issued a series of policies and measures to deny the status of cryptocurrencies as a legal currency, prohibit financial institutions from carrying out and participating in cryptocurrencies-related businesses, and clean up and ban domestic cryptocurrencies transactions and token issuance financing platforms, etc. In order to establish a normalized working mechanism and maintain the high-pressure crackdown on the trading of cryptocurrencies, the PBOC and nine other governmental departments2 jointly issued the Notice by summarising past regulatory experience and analysing newly emerging risks.

In detail

Clarify the nature of cryptocurrencies and related businesses

  1. The Notice emphasizes that:
    • Cryptocurrencies do not have the same legal status as legal currencies. The main characteristics of cryptocurrencies such as bitcoin, ETH, and USDT include: not being issued by monetary authorities; using encryption technology, distributed accounts or similar technologies; and existing in digital form. Cryptocurrencies have no legitimate compensation nature and cannot be circulated in the market as currencies.
    • All cryptocurrencies-related businesses are illegal financing activities. Any entity involved in cryptocurrencies-related businesses, such as those conducting exchanges between legal currencies and cryptocurrencies, exchanges among different cryptocurrencies, buying and selling cryptocurrencies as a central counterparty, matching and pricing services for cryptocurrency transactions, token issuance and financing, and cryptocurrencies derivatives transactions shall be suspected of conducting illegal financial activities, such as the illegal sale of token notes, unauthorised public issuance of securities, illegal operation of futures business and illegal fund-raising, etc. All the aforementioned businesses shall be strictly prohibited and resolutely banned according to laws. In case any illegal financial activities constitute a crime, criminal responsibility shall also be imposed.
  2. For the first time, the Notice clearly points out that it is also illegal for overseas cryptocurrencies exchanges to provide services to Chinese domestic residents through the internet. Relevant responsibilities will be imposed, according to laws, on the domestic staff of the relevant overseas cryptocurrencies exchanges, as well as the legal entity, unincorporated organisation, and individual person, who know or should know that they are engaged in a cryptocurrencies-related business, but still provide marketing publicity, payment and settlement, technical support and other services for such exchanges.
  3. The Notice also points out the legal risks associated with the investment trading of the cryptocurrencies. For the first time, the Notice stipulates that for any legal person, unincorporated organization and individual person to invest in cryptocurrencies and related derivatives, if such investment violates public order and good customs, the relevant civil legal acts shall be invalid and losses incurred shall be borne by such legal person, unincorporated organization and individual person. In case the investments are suspected of undermining financial order and endangering financial security, the relevant department shall investigate and take action according to laws.

Further clarify the restrictions on cryptocurrencies related business activities

  1. Following the rules and regulations promulgated in the past few years, the Notice also stipulates the prohibition on financial institutions and non-bank payment institutions providing services for cryptocurrencies-related business activities. Financial institutions and non-bank payment institutions shall not provide services such as account opening, fund transfer, clearing and settlement for business activities related to cryptocurrencies; shall not include cryptocurrencies in the scope of mortgages and pledges; shall not carry out insurance business related to cryptocurrencies or include cryptocurrencies in the scope of insurance liability; and shall report to relevant departments in a timely manner if they find clues of violations of laws and regulations.
  2. As the cryptocurrencies related business is conducted mainly online, the Notice strengthens the management of internet information content and access related to cryptocurrencies. Internet enterprises shall not provide services such as online business premises, business display, marketing publicity and paid diversion for business activities related to cryptocurrencies. If they detect any violations of laws and regulations, they shall report to relevant departments in a timely manner, and provide technical support and assistance for relevant investigation. According to the clues transferred by the financial management department, the competent department of network information and telecommunications shall promptly shut down internet applications, websites, mobile applications and applets that carry out cryptocurrencies-related business activities. 
  3. As a meaningful supplement to the rules and regulations promulgated in the past few years, the Notice strengthens the registration and advertising management of market subjects related to cryptocurrencies. The market supervision department shall strengthen the registration management of market entities. The registered names and business scope of enterprises and individual industrial and commercial households shall not contain words or contents such as “virtual currency”, “virtual assets”, “cryptocurrency” or “crypto assets”. The market supervision department shall, together with the financial management department, strengthen the supervision of advertisements related to cryptocurrencies according to laws, and timely investigate and deal with relevant illegal advertisements.
  4. The Notice also sticks to the principle of cracking down on illegal financial activities related to cryptocurrencies and cracking down on criminal activities related to cryptocurrencies, and also emphasises the requirement to strengthen industrial self-discipline.

Build up a working mechanism to handle the risks associated with the speculative trading of cryptocurrencies

The Notice stipulates the joint operation between different departments as well as the localisation of the risk control work.

Strengthen the risk monitor and risk alert of the speculative trading of cryptocurrencies

The Notice strengthens the overall risk monitoring and risk alert requirements for speculative trading of cryptocurrencies and stipulates the build-up of the mechanism of information sharing and rapid reactions.

Next steps

The Notice not only provides clarity regarding the manner in which cryptocurrency trading within or from China will be addressed moving forward, but also impacts offshore providers of services to China based customers. Offshore exchanges or companies with trading team members based in China who engage in offshore trading of cryptocurrencies should consider the following steps:

  • ensuring that they understand the terms of the Notice and its potential implications;
  • considering whether and how existing activities may need to be restructured, including facilitating the off-boarding of any Mainland clients or shifting trading activities to alternative jurisdictions;
  • determining whether existing systems can identify customers using a VPN to mask their actual location, and if not, what adjustments may need to be implemented; and
  • updating internal policies and procedures to ensure compliance with the terms of the Notice.

To discuss how our experience can assist you, or if you have any questions on any of the above matters, please do not hesitate to liaise with your usual contact at Baker McKenzie or the lawyers listed in this briefing.


2 Consisting of the Cyberspace Administration of China, the Supreme People’s Court, the Supreme People’s Procuratorate, the Ministry of Industry and Information Technology, the Ministry of Public Security, the General Administration of Market Supervision, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange.


Kevin Yuan is senior counsel of FenXun Partners which is a premier Chinese law firm. FenXun established a Joint Operation Office with Baker McKenzie in China as Baker McKenzie FenXun that was approved by the Shanghai Justice Bureau in 2015.


Lucca Li is an Associate in Baker McKenzie Shanghai office.

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