Looking back from the perspective of policy implementation, the “9·4” regulation focuses on “preventing the participation of token financing through Bitcoin and Ethereum”, while “6·21” focuses on the broader “virtual currency transactions.”
Original title: “Comparing the Similarities and Differences between 94 and 621 in Combating Virtual Currency Policies “From Inside to Outside”
Author: Uncle Tan
On September 4, 2017, seven departments including the People’s Bank of China jointly issued the “ Announcement on Preventing Token Issuance Financing Risks” . On June 21, 2021, the People’s Bank of China interviewed some banks and payment institutions on the issue of virtual currency speculation. , Both times have brought shocks to the cryptocurrency market, and the prices of various cryptocurrencies have plummeted. Then, what are the similarities and differences between the two regulatory tightening?
The 2017 policy is mainly aimed at IC0
The title of the announcement on September 4, 2017 was “Announcement on Preventing Token Issuance Financing Risks.” The first sentence of the announcement even stated clearly that “Recently, the domestic issuance of tokens includes initial token issuance (IC0). Financing activities have sprung up in large numbers, speculation and speculation are prevalent, and they are suspected of engaging in illegal financial activities, which have seriously disrupted the economic and financial order.” As we all know, 2017 is an endless year of various IC0 projects. Although there are a very small number of normal projects, the vast majority of projects are scams under the banner of virtual currency. The supervisory authorities noticed this risk and issued the announcement in due course.
According to the relevant statement in the announcement, “token issuance financing means that financing entities raise so-called “virtual currencies” such as Bitcoin and Ethereum from investors through the illegal sale and circulation of tokens. It is essentially an unauthorized illegality. The conduct of public financing, suspected of illegal sale of tokens and coupons, illegal issuance of securities, and illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities”, is to treat “Bitcoin and Ethereum” as a financing subject through “token issuance” Financing” assets raised.
Before the emergence of cryptocurrencies such as Bitcoin and Ethereum, criminal activities such as illegal fund-raising and financial fraud had to pass legal currency, and criminal activities through the method of raising cryptocurrency undoubtedly increased the difficulty of supervision. Therefore, in the 94 announcement , There is such a sentence, “Financial institutions and non-bank payment institutions shall not directly or indirectly provide products or services such as account opening, registration, trading, clearing, settlement, etc., for token issuance financing and “virtual currency”.
Prior to 94, domestic cryptocurrency transactions were carried out through user transfers to exchange company accounts. After 94, the “over-the-counter” era of cryptocurrency transactions began. Looking back from the perspective of policy implementation, the focus of supervision at the time was to “prevent participation in the issuance of token financing through Bitcoin and Ethereum” rather than “participate in transactions between legal currency and Bitcoin and Ethereum.”
The 2021 policy is aimed at a wider range of “virtual currency transactions”
The headline of the People’s Bank of China announcement in 2021 is “The People’s Bank of China Interviews Some Banks and Payment Institutions on Virtual Currency Trading The spirit of a plenary meeting is to crack down on Bitcoin and other virtual currency trading hype, protect the people’s property safety, and maintain financial security and stability…” It can be seen that compared to 2017, the scope of this crackdown includes all “virtual The issue of “transaction hype” in “currency”. For “transaction hype”, payment institutions such as banks or Alipay are a very important part, so this time the ban is much wider than in 2017.
This is not the first time that the restrictions on the trading of legal and encrypted currencies have been mentioned. As early as 2013, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued the “Notice on Preventing Bitcoin Risks” “, the following requirements for financial institutions and payment institutions:
“Not directly or indirectly provide customers with other services related to bitcoin, including: providing customers with bitcoin registration, trading, clearing, settlement and other services; accepting bitcoin or using bitcoin as a payment and settlement tool; developing bitcoin and renminbi And foreign currency exchange services; carry out bitcoin storage, custody, mortgage and other businesses; issue bitcoin-related financial products; use bitcoin as the investment target of trusts, funds and other investments.”
Literally, this policy seems very vague. For example, in the following period until September 4, 2017, exchanges such as Huobi, OK, and BTCChina have opened accounts with financial institutions and used these accounts to perform user deposit and withdrawal operations, then as Are banks that provide financial account services for several major exchanges counted as “developing Bitcoin, RMB and foreign currency exchange services”? Theoretically, the main body of “exchange services for bitcoin and renminbi” is the exchange rather than the financial institutions. However, the financial institutions do provide bitcoin-related services to the customers of the exchange.
The reason for this situation is probably because people from all walks of life did not have enough understanding of Bitcoin at that time, plus the entire cryptocurrency market was very small and had limited impact. The requirements of September 4, 2017 on “Financial institutions and non-bank payment institutions shall not directly or indirectly provide for token issuance financing and “virtual currency” to provide account opening, registration, trading, clearing, settlement and other products or services” , Can be regarded as a detailed explanation of the 2013 “Notice on Preventing Bitcoin Risks” , because as a financial institution, setting up an account for users to recharge and withdraw legal currency for the exchange can at least be regarded as an indirect exchange of virtual currency and RMB Services provided.
New issues in the “off-the-court” era
Before 2017, the currency circle did not have the term “frozen card”, because at that time all deposits and withdrawals were made through the company’s account of the exchange. In 2018, sporadic cases of frozen cards began to appear, and in the past two years, the phenomenon of “frozen cards” has intensified.
The main reason for the “frozen card” was that the card received funds involving telecommunications fraud. Due to the anonymity of Bitcoin, it has naturally become a favorite method of money laundering by scammers. Generally speaking, scammers will quickly buy the scammed money into coins to realize the rapid transfer of funds. When the money was scammed, the “Lying Gun” was frozen.
Just as illegal fundraising did not occur after the emergence of cryptocurrency, telecom fraud is not a new thing after the emergence of cryptocurrency. But there is no doubt that the emergence of cryptocurrency has provided great convenience for these two kinds of criminal activities, which has attracted regulatory attention. If we say that the ban on September 4, 2017 was mainly aimed at illegal fund-raising and financial fraud, the interview with the People’s Bank of China on June 21, 2021 was mainly aimed at the risk of money laundering. How big the money laundering market is can be seen from the telecom fraud industry alone. According to reports from People’s Daily and People ’s Daily Online :
“In 2020, 322,000 telecommunications network fraud cases were cracked, 361,000 criminal suspects were arrested, more than 272.0 billion yuan of funds involved in the case were stopped, 8.7 million people were discouraged from being deceived, and more than 18.7 billion yuan of economic losses were recovered. It has effectively safeguarded the people’s property safety and legitimate rights and interests.
“From January to May 2021, 114,000 telecommunications network fraud cases were cracked across the country, more than 14,000 criminal gangs were destroyed, and 154,000 criminal suspects were arrested. Since the beginning of this year, a total of 265.4 billion yuan of funds involved in the case has been urgently stopped. The masses recovered 99.1 billion yuan in economic losses.”
The amount of “stop payment” in the first five months of 2021 is 265.4 billion yuan, which is close to last year’s total amount of 272 billion yuan. It can be seen that telecom fraud activities are still rampant, and a large part of these stopped payments will go through money laundering. Very “efficient” cryptocurrency is “whitewashed”. After comprehensively measuring the benefits (such as the use of waste water and electricity, etc.) and negative effects (environmental issues, money laundering issues) that cryptocurrencies bring to the economy, it is not difficult to understand that the People’s Bank of China has further strengthened the ban on virtual currency transactions.
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