People's Bank of China: Virtual currencies do not have the same legal status as fiat currencies

The People's Bank of China and eight other departments issued the "Notice on Further Preventing and Handling Risks Related to Virtual Currencies and Related Activities," clarifying the essential attributes of virtual currencies, tokenization of real-world assets, and related business activities. Tokenization of real-world assets refers to the activities of converting ownership, income rights, and other rights of assets into tokens or other rights and bond certificates with token characteristics using cryptographic technology and decentralized ledgers or similar technologies, and issuing and trading them. Foreign entities and individuals are prohibited from illegally providing services related to the tokenization of real-world assets to domestic entities in any form.

The notice emphasizes that virtual currencies do not have the same legal status as legal tender. Virtual currencies such as Bitcoin, Ethereum, and Tether have key characteristics including being issued by non-monetary authorities, using cryptographic technology and decentralized ledgers or similar technologies, and existing in digital form. They do not have legal tender status and should not and cannot circulate as currency in the market.

The notice mentions that activities related to virtual currencies are considered illegal financial activities. Foreign entities and individuals are prohibited from illegally providing services related to virtual currencies to domestic entities in any form. Stablecoins pegged to legal tender perform part of the functions of legal tender in a disguised manner during circulation. Without the approval of relevant departments in accordance with laws and regulations, no domestic or foreign entities or individuals may issue stablecoins pegged to the Renminbi abroad.

The notice also states that the National Development and Reform Commission and relevant departments strictly control virtual currency "mining" activities, continuously promote the rectification of virtual currency "mining" activities, comprehensively sort out and shut down existing virtual currency "mining" projects, and strictly prohibit the establishment of new "mining" projects and the provision of various services such as "mining machine" sales by "mining machine" production enterprises within the country