Gherson white-collar team have previously written a blog on ‘China’s “ban” on cryptocurrencies on 24 September 2021. Now looking into this in more detail.
The Chinese government issued the “Notice on Further Preventing and Disposing of Speculation Risks in Virtual Currency Trading”.
The 2-page notice mainly contained broad policy aims and goals, save for Section 1 of the notice, which contained several provisions that had an impact on the legality of cryptocurrencies in China.
Section 1 of the notice can be generally summarised as follows:
A- Those who undertake business activities, such as providing exchange facilities for cryptocurrencies, acting as intermediary, providing valuation for crypto transactions, issuing cryptocurrencies, crypto financing, providing cryptocurrency related services to those in China via internet from abroad, etc., are liable for the offence of engaging in Unlawful Financial Activities (“UFA”).
The offence of UFA can broadly be compared to the offence of carrying on a regulated financial activity without authorisation in the UK (i.e. Section 23 of the Financial Services and Markets Act 2000). It is interesting to note that Hong Kong takes a similar, but less stringent, approach, whereby those operating crypto exchanges and trading platforms need to be registered with the Securities and Futures Commission.
B- The civil courts in China will not recognise transactions involving crypto currency and no remedies will be provided for losses incurred in these transactions.
This effectively means that the Chinese courts are unlikely to entertain civil claims that involve cryptocurrencies.
Aside from the September 2021 notice, the Chinese government has also published various other vague guidance and announcements on this subject. It remains to be seen how the broad policy objectives contained in these announcements and guidance will be implemented.
It would appear that the recent regulatory shift aims to criminalise and outlaw crypto service providers and intermediaries rather than target private individuals holding cryptocurrency or the trading of cryptocurrency between private individuals. If you are affected by these changes, we would encourage you to seek specialist legal advice.
On a related topic, Gherson Solicitors have also written about China’s implementation of a central bank digital currency (“CBDC”) in light if its “ban” on crypto currencies, and the wider affects that the implementation of CBDCs could have on cryptocurrency regulation.
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The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.
©Gherson 2021