Lawyers interpret the "1128" regulatory policy: focusing on regulating the use of stablecoins for illegal Exchange Currency activities.

On December 1, and November 28, the People's Bank of China held a coordination meeting to combat virtual currency trading speculation (hereinafter referred to as the 1128 meeting) in conjunction with more than a dozen departments, emphasizing the need to continue adhering to the relevant regulations of the 2021 “Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation” (hereinafter referred to as the 9.24 Notice), imposing a prohibitive policy on the operational business of virtual currencies in mainland China, and stressing the need to crack down on the use of virtual currencies for money laundering and illegal capital outflows. In response to this policy, lawyer Xiao Za interpreted that, overall, the 1128 meeting is a reiteration of old themes, and what truly needs regulation this time is the illegal exchange of currency using stablecoins, as such behavior severely disrupts financial order. It is well known that China has implemented a relatively strict foreign exchange control system, where generally, each person can exchange no more than 50,000 USD in foreign currency per year. Now that the stablecoin market is gradually expanding, with growing application scenarios and an increase in the number of coin merchants, many capital outflow demands have already been addressed by stablecoins such as USDT and USDC. Moreover, some individuals have exploited stablecoins to facilitate money laundering or concealment of criminal proceeds for upstream crimes. Furthermore, in judicial practice, there have been bold foreign trade merchants who used USDT and USDC to circumvent UN sanctions, assisting sanctioned countries in foreign trade. From a judicial perspective, over the past year or two, China's judicial authorities have gradually increased their regulatory efforts against coin merchants, with a large number of merchants convicted and punished for illegal business operations, assistance offenses, money laundering, and concealment of criminal proceeds. In addition, lawyer Xiao Za 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 being open and the other restricted in terms of virtual assets, with a clear regulatory attitude: it does not mean that you cannot innovate financially, but you must innovate in the places I designate.