Thirteen departments in China jointly crack down on "Cryptocurrency Trading"! stablecoins rarely become a regulatory target.

On November 28, the People's Bank of China held a coordination meeting to combat the speculation in virtual money trading, attended by relevant leaders from 13 departments including the Ministry of Public Security, the Supreme People's Court, and the Supreme People's Procuratorate. The meeting notably singled out “stablecoin,” clearly stating that stablecoins are a form of virtual coins and pose risks of being used for Money Laundering, fundraising fraud, and illegal cross-border fund transfers. The meeting emphasized that activities related to virtual money are considered illegal financial activities.

Stablecoin singled out as a new target

In previous regulatory documents, the authorities often referred to “Virtual Money” collectively. However, in this conference's press release, it is very rare to see “stablecoin” (such as USDT, USDC, etc.) singled out for criticism. The meeting emphasized that stablecoins are a form of virtual money and currently cannot effectively meet requirements for customer identification, anti-Money Laundering, and other aspects, posing risks of being used for Money Laundering, fundraising fraud, illegal cross-border fund transfers, and other illicit activities.

This is a highly penetrating signal. In past judicial practices, USDT has often been seen as a “mediating tool.” Many OTC merchants and businesses believe that using stablecoins for settlement can avoid the risks of directly holding high-volatility virtual coins like Bitcoin. However, under the tone set by this meeting, this perception has been completely overturned. The authorities fundamentally denied the possibility of stablecoins being compliant within the existing financial system.

This also means that future crackdowns on USDT will no longer be limited to the “speculation” aspect, but may also hit hard on the “payment and settlement” aspect. For OTC merchants and relevant parties receiving payments in USDT, once involved in suspected funds, the risk of being classified as “aiding and abetting crimes” (aiding information network criminal activities), “concealment crimes” (concealing or hiding criminal proceeds), “Money Laundering”, or “illegal operation crimes” will further increase.

Three Major Warnings for Stablecoins Being Specifically Named

Payment Settlement Risk: Receiving payments in USDT is no longer a “grey area”, but a clear compliance risk point.

Cross-Border Transfer Crackdown: Using stablecoins for cross-border fund transfers will face harsher legal consequences.

High Risk OTC Merchants: OTC merchants engaged in the exchange of USDT and RMB have become key targets for crackdowns.

In recent years, many overseas enterprises, cross-border e-commerce, and gaming companies have used USDT as a settlement tool, believing that it can circumvent foreign exchange controls and reduce cross-border payment costs. However, this meeting clearly categorizes stablecoins as “having the risk of being used for non-compliant cross-border fund transfers,” which means that this practice may face criminal risks in the future. Any physical business that still uses USDT as a settlement tool is advised to immediately implement compliance measures.

Judicial interpretation is about to be issued to fill the legal gap

During the meeting, there was a statement that deserves the attention of all legal professionals and practitioners: “Each unit needs to improve the regulatory policies and legal basis.” This time, all four core judicial agencies (Ministry of Public Security, Ministry of Justice, Supreme Court, Supreme Procuratorate) were present and explicitly proposed to “improve the legal basis.” This is not only a coordination between departments but also aims to address the long-standing issues of “different judgments for the same case” and “intersection and application of criminal and civil laws” in judicial practice.

The main basis for combating virtual money still largely refers to the administrative normative documents such as the “Notice” from 2021. In terms of the application of criminal law, there is still some room for legal interpretation in certain aspects. For example, in OTC transactions, some local courts have ruled them as illegal operation crimes, while others have classified them as aiding and abetting crimes, and some have deemed them as concealment crimes. This phenomenon of “different judgments for the same case” arises from the lack of unified legal application standards.

Future judicial interpretations may fill in the gaps in the following “gray areas.” The boundaries for convicting relevant crimes and the main situations: clearly defining under what specific circumstances a crime is constituted and what crime it constitutes. Amount determination: unifying the calculation standards for the amount of Virtual Money involved in the case, whether based on the market price at the time of the incident, the profit amount, or the transaction flow. Disposal regulations: standardizing the procedures for the seizure, confiscation, and subsequent disposal of the involved Virtual Money, addressing the legal dilemmas faced by law enforcement agencies when handling seized coins.

Three Core Issues That Judicial Interpretation May Clarify

Refinement of Conviction Standards: Clarify the specific conviction standards for different behaviors such as coin speculation, OTC trading, and stablecoin settlement.

Unified Amount Calculation: A unified method for calculating the amounts involved in Virtual Money cases to avoid confusion in judicial practice.

Seizure and Disposal Regulations: Clarification of the legal procedures for the seizure, detention, auction, or destruction of involved virtual money.

This marks a new stage in the handling of virtual money cases, shifting from “policy-oriented” to “refined legal application.” For practitioners in the coin circle and legal professionals, this means that the “legal gray area” they have relied on in the past will gradually disappear, replaced by clear and strict legal red lines.

Upgraded Investigation of Dual Penetration of Capital Flow and Information Flow

The meeting emphasized focusing on “information flow and capital flow.” This is not only technical monitoring but also an evolution of investigative methods and comprehensive coverage. In terms of capital flow, the connection between bank cards and on-chain addresses will become tighter. The traditional “card severing action” will be upgraded to a “chain severing action,” allowing regulatory authorities to track the complete path of funds from bank cards to virtual money exchanges and then to on-chain addresses.

In terms of information flow, access records, logs, and on-chain interaction data from domestic and foreign social media and exchanges will become key evidence chains for conviction. This “dual flow” monitoring is extremely lethal. For example, for OTC merchants, if the “fund flow” shows interaction with the address involved, and there are expressions such as “not passing cards,” “testing cards,” and “exchange rate anomalies” in the “information flow,” it can directly imply subjective knowledge, thereby constituting a crime.

“No Card” is black slang in the OTC industry, meaning to directly conduct USDT transactions without going through a bank card. “Card Test” refers to testing whether the bank card is functioning properly and has not been frozen or subject to risk control. “Abnormal Exchange Rate” refers to the USDT exchange rate significantly deviating from normal levels, which is usually an indication of Money Laundering. The emergence of these terms, combined with suspicious capital flows, can almost certainly constitute subjective knowledge in judicial practice, thereby bearing criminal responsibility.

The upgrade of this monitoring technology has dramatically increased the legal risks of OTC trading. In the past, OTC merchants might have believed that as long as they did not directly participate in fraud or other criminal activities, the risks of merely providing virtual coin exchange services were manageable. However, under the investigative methods of dual-flow penetration, any contact with the funds involved may be traceable. Even if the merchants subjectively do not know the source of the funds, if there are suspicious statements in the chat records, they may be deemed to “should have known” and bear responsibility.

Compliance Pitfalls for OTC Merchants and Physical Enterprises

The meeting pointed out that “Virtual Money related business activities are classified as illegal financial activities” and emphasized “severe crackdowns”. What specific related business activities are referred to here? According to the standards of 2021, individuals holding coins do not fall under the crackdown's “related activities”, and personal transactions for pure investment are not subject to criminal prosecution, but fall under the “risk-bearing” area. However, commercial trading is classified as “illegal financial activities”.

OTC merchants are the first to become a high-risk group. The so-called “private transfers and offline payments to U” are precisely the targets of the regulatory authorities for “severely cracking down on illegal criminal activities.” In the past, many OTC merchants believed that as long as they provided legal exchange services and did not engage in criminal activities, they would not face legal risks. However, the conclusions drawn from this conference have completely shattered this illusion. As long as one engages in the business of exchanging virtual coins and fiat currency, regardless of subjective intent, it may be classified as illegal financial activity.

If physical enterprises use virtual money for settlement in their business, they also face huge risks. Whether it is game going overseas, cross-border e-commerce, or other businesses involving cross-border payments, if there is still the use of USDT as a settlement tool, it is recommended to immediately implement compliance blocking. This meeting clearly defined stablecoins as a form of virtual money, and pointed out the risks involved in cross-border fund transfers, indicating that using USDT for settlement is no longer a “gray area,” but a clear compliance risk point.

Any form of “payment on behalf of”, “purchase on behalf of”, or “rental of accounts/wallets” is likely to violate crimes such as Money Laundering under the new judicial trends. The threshold for conviction of Money Laundering is relatively low; as long as one is aware that others are using information networks to commit crimes and still provides technical support, advertising promotion, payment settlement, and other assistance, it may constitute a crime. In the field of Virtual Money, providing wallet addresses, exchanging on behalf of others, or renting out bank cards may all be deemed as acts of assistance.

Mandatory Transition from Gambling to Compliance

The meeting pointed out that due to various factors in recent times, speculation and hype around Virtual Money have risen, and related illegal criminal activities have occurred from time to time, posing new situations and challenges for risk prevention and control. This statement acknowledges the resurgence of the virtual coin market and explains why such a high-level meeting is still necessary in 2025, even after strict policies were implemented in 2021.

Bitcoin broke historical highs during the bull market of 2024-2025, driving the prosperity of the entire Virtual Money market. Although trading of Virtual Money is prohibited within China, there are still a large number of investors participating in trading through overseas exchanges and OTC channels. This phenomenon of “prohibition without cessation” has drawn high attention from regulatory agencies, especially with the significant increase in fraud and Money Laundering cases involving Virtual Money.

The meeting requires all units to continue to adhere to the prohibitive policy on Virtual Money and to continue to combat illegal financial activities related to coins. All units should deepen cooperation, strengthen information sharing, further enhance monitoring capabilities, severely crack down on illegal criminal activities, protect the safety of people's property, and maintain the stability of economic and financial order. This joint action of 13 departments demonstrates the determination and execution power of the Chinese government.

For practitioners in the coin industry, OTC merchants, and entities potentially involved in U coin settlements, the core viewpoint released at this conference is not just “prohibition” but rather a further tightening and refinement of the red line. In the face of new regulatory circumstances, both coin industry practitioners and related enterprises should objectively assess the current environment, re-evaluate business compliance, emphasize data retention and review, and prevent related risks. More important than earning profits is ensuring the safety of individuals and assets.

11.28 The meeting is not a simple routine talk; it is a strategic upgrade for the country in the face of new challenges to financial security. The possibility of stablecoins being compliant within the existing financial system has been completely denied, and the “legal patches” for judicial crackdowns should be implemented soon.