Lawyer's Interpretation of the "1128" Regulation Policy: Focus on Regulating Activities Using Stablecoins for Illegal Foreign Exchange交

BlockBeats News, December 1st, the People's Bank of China, together with more than ten departments, held a coordination meeting on combating the speculation of virtual currency transactions on November 28th (hereinafter referred to as the 1128 Meeting). It emphasized the need to continue to adhere to the relevant provisions of the 2021 "Notice on Further Preventing and Disposing of Risks Associated with the Speculation of Virtual Currency Transactions" (hereinafter referred to as the 9.24 Notice), which in mainland China adopts a prohibitive policy towards the operational business of virtual currencies and specifically highlighted the need to crack down on money laundering and illegal cross-border fund flows using virtual currencies.

In response to this policy, Lawyer Xiao Sa interpreted, overall, the 1128 Meeting is a reiteration of previous stances, and what is truly being regulated this time is the illegal foreign exchange activities using stablecoins, which seriously disrupt the financial order. As is well known, China has established a relatively strict foreign exchange control system, where generally each person's annual foreign exchange quota does not exceed $50,000. Now, as the stablecoin market gradually expands, application scenarios continue to grow, and the number of cryptocurrency exchanges increases significantly, many capital outflow needs have been met by stablecoins such as USDT and USDC. Furthermore, there are even cases where stablecoins are used to provide money laundering services or to disguise and conceal criminal proceeds for upstream criminal activities. Moreover, in judicial practice, there have been bold cases where foreign traders used USDT and USDC to circumvent United Nations sanctions resolutions, assisting sanctioned countries in their foreign trade.

From a judicial practice perspective, in the past year or two, China's judicial authorities have gradually strengthened regulation on cryptocurrency exchanges, and many exchanges have been convicted and punished for crimes such as illegal business operations, helping schemes, money laundering, and disguising and concealing criminal proceeds.

In addition, Lawyer Xiao Sa believes that the 1128 Meeting will not affect Hong Kong's open policy towards virtual assets. Hong Kong and mainland China have gradually formed a basic pattern of one openness and one restriction regarding the treatment of virtual assets, and the regulatory attitude is very clear: it's not that you can't innovate in finance, but you must innovate in the place I designate.