New Waves of Regulatory Development of China on Crypto Assets
2023-07-14
随着数字货币和区块链技术的快速发展，各国对加密资产表现出不同的监管态度。中国内地和香港对数字货币的监管逻辑截然不同。中国大陆已颁布许多政策，明确了数字货币的法律地位，并对数字货币采取了严格的监管态度，全面禁止与代币发行融资交易和虚拟货币相关的非法金融活动。香港秉持对新兴事物与创新金融模式一贯的开放与包容，对数字货币表现出了极大兴趣，其态度由最初的中立观望转变为包容接纳与积极监管并存。香港目前正在实施新的VASP发牌制度，对经营证券类代币的运营商，要求同时持有金融牌照以及VASP牌照，持牌人登记册需提供给公众人士查阅。本文将对中国大陆和香港加密资产监管的最新发展情况进行分析。
With the rapid development of digital assets and blockchain technology, countries have shown different regulatory attitudes towards crypto assets. The regulatory logic of digital currencies in mainland China and Hong Kong is quite different. Government of mainland China has clarified the legal status of digital currencies through various circulars and announcements. It has adopted a strict regulatory attitude towards digital currencies, completely banning illegal activities related to Initial Coin Offerings and virtual currencies. Hong Kong has always been open and inclusive to new things and innovative financial models, and its attitude has changed from the initial neutral observation to inclusive acceptance and active supervision. Hong Kong is now implementing a new VASP licensing regime, with a dual licensing requirement for operators of securities-based tokens and a register of licenses available for public inspection. This article will analyse the latest developments in the regulation of crypto assets in mainland China and Hong Kong.
I.Hong Kong's Regulatory Framework for Digital Currency
On October 31, 2022, Financial Services and the Treasury Bureau of the Hong Kong Special Administrative Region (FSTB) issued the Policy Statement on Virtual Asset Development in Hong Kong, indicating that Hong Kong will work towards the establishment of a licensing regime for virtual asset service providers.
On June 1, 2023, the Securities and Futures Commission (SFC) proposed in the Consultation Paper on Proposed Regulatory Requirements Applicable to Operators of Virtual Asset Trading Platforms Licensed by the Securities and Futures Commission that a dual licensing regime will be implemented after the new VASP policy comes into effect:
a.Operators operating securities-based tokens (STOs) will need to hold both a financial license (Licenses No. 1 and 7) and a VASP license.
b. Operators of non-securities based tokens (Bitcoin, Ether, NFT, etc.) will only be required to hold a VASP license.
The register of licensees is required to be made available for public inspection and access is free of charge. Retail investors are allowed to participate in trading and investing in security-based tokens (including Mainland investors) subject to adequate risk assessment. With the implementation of the new VASP licensing regime, the SFC's regulatory focus will be on virtual asset exchanges.
II.Regulatory Framework of Mainland China for Digital Currencies
In 2013, Circular of the People's Bank of China, Ministry of Industry and Information Technology, China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission on the Prevention of Risks from Bitcoin (Yinfa [2013] No. 289) clarified the nature of Bitcoin in the first place. According to the circular, Bitcoin is considered as a specific virtual commodity and does not have the same legal status as currency. Therefore, it cannot and should not be used in the market as currency. Secondly, the circular stipulated that financial institutions and payment institutions are not allowed to engage in any business related to Bitcoin.
In 2017, the Announcement of the People's Bank of China, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the State Administration for Industry and Commerce, the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission on Preventing Initial Coin Offerings (ICO) Risks specifies the essential nature of ICO. The announcement points out that “initial Coin Offering (ICO) is a regulated means used by a financing body to issue and sell tokens to investors in exchange for the so-called Virtual Currencies such as Bitcoins and Ethercoins, which in essence is an unauthorized and illegal public fundraising, and this scheme is suspected of illegal sale of tokens, illegal issue of securities, illegal fundraising, financial fraud, pyramid selling and other illegal criminal activities.”
III.Research on Digital Currency —DC/EP by the Government of Mainland China
While the regulatory framework of mainland China strictly restricts the private digital currencies, completely banning illegal activities related to Initial Coin Offerings and virtual currencies, the government is trying to do research and pilot test on its own digital currency. In 2014, the People's Bank of China (PBOC) established a special research group on legal digital currency and officially launched the central bank's digital currency research plan.In January 2017, the PBOC officially established the Digital Currency Research Institute, dedicated to carrying out the top-level design and R&D work of the central bank's Digital Currency.
At the end of 2017, the State Council approved the PBOC to take the lead in organizing partial commercial banks and relevant institutions to jointly develop a digital renminbi system (Digital Currencies/ Electronic Payment, DC/EP). From 2018 to 2019, the R&D bases of the Digital Currency Research Institute of the People's Bank of China were located in Shenzhen, Nanjing and Suzhou. In April 2020, the Digital Currency Research Institute of the PBOC announced that it will conduct closed pilot tests of the central bank's digital currency in Shenzhen, Suzhou, Xiongan New Area, Chengdu and the future Winter Olympics scenario.
IV.Judicial Cases of the PRC on Digital Currency
The judicial cases were also impacted by the regulatory framework of mainland China on digital currencies.
1.Second instance civil judgment on a contract dispute between Deng Yunlu and Liao Liling (2020)
In this case, Hou Suqin, a third party to the case, introduced Liao Liling to invest in financial products on the MFC platform overseas. The judge held that there was no evidence to prove that the MFC platform was a legally approved investment institution by the state, nor was there evidence to prove that Hou Suqin or Deng Yunlu explicitly explained the investment products and risks to Liao Liling before the investment. Therefore, the legal relationship between the parties regarding the investment in financial products should be considered invalid. Deng Yunlu should return the investment funds received from Liao Liling due to the invalid investment relationship, and according to the WeChat messages and call recordings between Deng Yunlu and Liao Liling, Deng Yunlu expressed the intention to refund the investment amount. Deng Yunlu received RMB259,000 of Liao Liling's investment funds and has returned RMB10,997, leaving RMB248,003 to be returned. The calculation of the amount of investment funds to be returned made in the first-instance trial was correct and was confirmed by the court.
2.House Purchase with Digital Currency, Unsuccessful Payment (Case Reference: (2020) Yu 15 Min Zhong No. 5171)
Based on the facts ascertained in this case, on July 7, 2019, the appellant and the appellee entered into a House Purchase Agreement, where both sides agreeing that the appellee would sell her house to the appellant. Since the parties' true intentions expressed in the agreement did not violate any mandatory provisions of laws and regulations, the agreement should be valid. Although the appellant used "Ant Token" as the payment method for the agreement, and the "Ant Token" was an electronic voucher issued to unspecified recipients without approval, the first instance court held that the voucher did not have the monetary attributes of legal tender and was therefore invalid. This violated the provisions of the Announcement on Preventing Initial Coin Offerings (ICO) Risks jointly issued by the People's Bank of China and other departments. Therefore, the payment method should be deemed invalid. Although the payment method was invalid, it did not affect the validity of the House Purchase Agreement in question. Therefore, the determination that the agreement was invalid lacked sufficient factual and legal basis. Although the agreement was valid, because the appellant's payment of the purchase price with "Ant Token" was invalid, it must be deemed that the appellant did not pay the purchase price as agreed in the agreement, and the agreement was not fully performed. Therefore, the appellant's request to confirm that the house belonged to him and to require the appellee to deliver the house had insufficient factual basis, and it should not be upheld by the court.
3.Second Instance Civil Judgment of Du Shousheng and Zhang Hua Contract Dispute (2020)
It was held that according to the agreement in the Digital Currency ETH Cooperation Agreement signed by the appellant Du Shousheng and the appellee Zhang Hua, Du Shousheng borrowed Zhang Hua's digital currency and traded on the digital currency trading platform using the account named "yin2019". All profits and losses were borne by Du Shousheng, and Zhang Hua received a fixed return of 2% per month. The relationship between the two was an actual loan relationship rather than a commission agency relationship. Although the Circular on Preventing Risks of Bitcoin jointly issued by the People's Bank of China and other departments stipulates that financial and payment institutions shall not price their products or services with bitcoin, nor buy or sell bitcoin as a central counterparty, it does not prohibit other entities from trading in bitcoin. Therefore, the Digital Currency ETH Cooperation Agreement signed by Zhang Hua and Du Shousheng was a true expression of both parties' intentions and did not violate any mandatory provisions of laws and regulations, and should be deemed legal and valid. The appellant’s appeal claimed that the legal relationship in this case was a commission agency relationship and illegal, and the first instance court's determination of a legal loan relationship was incorrect, and it was not supported by this court. Regarding the issue of the first instance court's discretionary ruling that Du Shousheng shall pay interest of 44,756 yuan, although Zhang Hua and Du Shousheng agreed in the Digital Currency ETH Cooperation Agreement that Du Shousheng shall pay dividends of no less than 2% per month. According to the definition in the Circular on Preventing Risks of Bitcoin, Bitcoin and other digital currencies are not true currencies, so there is no basis for calculating interest on them. Therefore, the court reduced the above interest determined by the first instance judgment.
Conclusion
In China, the government has a strict legal and regulatory framework in place for digital currencies. Bitcoin and other cryptocurrencies are not considered legal tender and financial institutions and payment institutions are prohibited from engaging in any business related to them. In addition, initial coin offerings (ICOs) are seen as unauthorized and illegal public fundraising and are prohibited. The Chinese government has also established a digital renminbi system, and the central bank has conducted pilot tests of its digital currency in several cities.
However, in Hong Kong, the Financial Services and the Treasury Bureau has issued a policy statement on virtual asset development, indicating that the city will work towards the establishment of a licensing regime for virtual asset service providers. The Securities and Futures Commission has proposed a dual licensing regime for virtual asset trading platforms. The focus of regulation will be on virtual asset exchanges, and virtual asset service providers need to ensure they comply with the relevant regulatory requirements.
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本文由德恒律师事务所律师原创，仅代表作者本人观点，不得视为德恒律师事务所或其律师出具的正式法律意见或建议。如需转载或引用本文的任何内容，请注明出处。
