Virtual Currency Lawyers Explain China’s Financial Stability Report (2024) Central Bank’s New Stance on Cryptocurrencies and Practical Concerns for Hong Kong

Some time ago, the “China Financial Stability Report 2024” was released, which first mentioned the latest developments in global cryptocurrencies and relevant legislation, and especially provided a relatively detailed explanation of Hong Kong’s practices in the cryptocurrency field.

In this context, the report not only reflects the central bank’s changing attitude towards crypto assets, but also shows my country’s continued interest and gradual exploration of this emerging industry. Let’s take a look at the specific changes:

1. From prudent supervision to objective description: The central bank’s attitude towards crypto-assets has changed

The Central Bank’s Financial Stability Report for 2023 states:

The Central Bank’s financial stability report for 2024 states the following:

By drafting the financial stability reports issued by the central bank in 2023 and 2024, we can see that compared to last year, China’s 2024 financial stability report has seen a notable shift in its stance towards crypto assets. In the 2023 report, the central bank mainly focused on the financial and technological risks of cryptoassets, emphasized their potential indirect effects on financial stability, and proposed strict regulatory measures.

However, in this year’s report, The central bank has not shown much negative attitudes towards the practice of crypto assets. Although the central bank continued to emphasize the risks of crypto assets, it paid special attention to the recovery of the crypto asset market and global development trends, and objectively commented on the legislative practices of various countries and government organizations in regulating cryptocurrencies.

The report stated:

• Although the market price and trading volume of crypto assets rebounded in 2023 after a series of risk events, there are still potential risks such as large price fluctuations and ambiguous market governance. At the same time, regulatory authorities in various countries have continuously strengthened their supervision of crypto assets, and many countries around the world have introduced relevant regulations.

The Financial Stability Report not only mentions the market size and risks of cryptocurrencies, but also provides an overview of the global legal framework and regulatory model, indicating that… China’s financial regulators are also interested in the compliance process in this market. We can reasonably expect whether more legislation and policies can be passed to adapt to current changes.

2. Cryptocurrency practices in Hong Kong

One of the highlights of the report is that for the first time, a special and detailed description of Hong Kong’s practical exploration and innovative achievements in the field of cryptocurrencies was provided. As an indispensable part of the financial system market in mainland China, Hong Kong’s cryptocurrency regulatory practices have attracted national attention. Hong Kong has executed it creatively The “dual licensing” regulatory system. which neatly divides virtual asset trading platforms into two categories: Securities and non-securities It is regulated by legal frameworks that suit its characteristics. This innovative regulatory model has not only sparked widespread heated discussions and in-depth market discussions, but has also become a distinctive feature of the Hong Kong crypto asset market.

By clearly distinguishing between “Security Tokens” and “Non-Security Tokens” Hong Kong has built a more detailed and flexible regulatory framework for the cryptocurrency industry. This framework not only ensures the uniform operation of the market, but also effectively enhances market participants’ awareness of compliance through the licensing system. There is no doubt that Hong Kong’s cryptocurrency regulatory practices provide a valuable reference and benchmark for other regions in exploring crypto asset regulation.

In addition, it is not difficult to find from the disclosure of the Financial Stability Report that many experts and scholars are closely following the development trends of relevant industries in Hong Kong, and are actively formulating and improving relevant laws and regulations on the basis of their development situation and trends, in order to adapt. Better cope with the financial environment and its regulation under the new situation.

3. Frequent mention of global stablecoins – Regulatory interest of central banks in global stablecoins

The report mentioned the Chinese central bank’s interest in global stablecoins several times. As an important branch of cryptocurrencies, stablecoins have gradually become a research hotspot in the global financial market due to their relatively stable value mechanism. In recent years, the rapid development of stablecoins has attracted great attention from central banks around the world. Many countries are intensively studying how to effectively regulate these emerging assets, while ensuring financial stability and exploiting their potential value.

The People’s Bank of China shows interest in global stablecoins China’s forward-looking thinking in financial stability and its insight into emerging trends in the international financial industry. Stablecoins are related to traditional fiat currencies and enjoy a certain degree of stability, but their potential in cross-border payments and the liquidity of financial markets also make them a testing ground for financial policies in many countries. Against this background, the People’s Bank of China’s interest in and continued research into stablecoins is not only a response to changes in the global market, but also a reflection of China’s gradual involvement and exploration in the field of cryptocurrencies.

4. Cryptocurrency Market Prospects: National Position and Future of the Industry

In short, although the regulation of the cryptocurrency market is still in the stage of continuous exploration and in-depth research, the 2024 China Financial Stability Report makes it clear. The People’s Bank of China’s attitude towards cryptocurrencies is changing, and Hong Kong’s practical experience has made the market prospects of this industry attract more market participants, experts, scholars and practitioners in the relevant industry. In particular, the regulatory system for cryptocurrencies has been gradually improved around the world, and the innovation and standardization process of related industries has been gradually accelerated.

5. The lawyer believes

From the point of view of regulatory authorities: Major platforms must be properly supervised regarding their transactions and business activities to ensure that activities are carried out within the framework of legality and compliance. At the same time, The focus of supervision should be on providing clearer and more specific regulations and reducing gray areas to avoid misjudgment of legitimate and lawful trading behaviours.

From a law enforcement perspective: Public authority must be supervised and must not act rashly in gray areas, disrupting the development of the industry environment.

As for financial investment activities: Currently in mainland China, institutions involved in cryptocurrency speculation and the cryptocurrency circuit are still vulnerable to illegal financial activities. In the absence of relevant laws and administrative regulations, mainland investors involved in cryptocurrency financing face greater legal risks and difficulties in protecting their rights.

Here, we sincerely remind investors that due to the high-risk nature of crypto financial products, participants always need to enhance their compliance awareness. Non-professional investors or individuals who lack the corresponding investment experience and knowledge Caution should be exercised and blind entry into the market should be avoided, so that investment behavior does not turn into a high-risk “gamble”.

As the regulatory environment continues to improve and mature, investors, financial institutions and government departments must continually improve their understanding and ability to adapt to the evolving financial system and market dynamics.

This article represents only the personal views of the author and does not constitute legal advice or legal opinion on specific matters.

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