Seven industry associations issue risk warning: Beware of illegal fundraising, pyramid schemes, and fraud carried out under the guise of virtual currencies

On the evening of December 5, the National Internet Finance Association of China, together with several other associations, jointly issued the “Risk Alert on Preventing Illegal Activities Related to Virtual Currencies and Similar Activities.” The alert warns of risks regarding “air coins,” real-world asset tokens, mining, and other activities involving cryptocurrencies, urging the public to strengthen their awareness and ability to identify risks, safeguard their own “wallets,” and refrain from participating in activities related to virtual currencies, real-world asset tokens, as well as illegal fundraising and illegal issuance of securities under the guise of cryptocurrency “mining.”

The full text of the risk alert is as follows:

Recently, concepts related to virtual currencies have quickly gained popularity. Some lawbreakers have taken advantage of this opportunity to hype up trading and speculation activities, conducting illegal fundraising, pyramid schemes, and other illegal activities under the guise of stablecoins, “air coins” (such as Pi Coin), real-world asset (RWA) tokens, and “mining.” They also use virtual currencies to transfer proceeds of illegal and criminal activities, which seriously harms the property safety of the public and disrupts the normal economic and financial order. To further implement the requirements of the People’s Bank of China, the National Administration of Financial Regulation, the China Securities Regulatory Commission, and other departments as stated in the “Notice on Preventing Token Issuance Financing Risks,” the “Notice on Further Preventing and Handling Risks of Virtual Currency Trading Hype,” and to follow the spirit of the coordination mechanism meetings for combating virtual currency trading hype, the National Internet Finance Association of China, China Banking Association, Securities Association of China, Asset Management Association of China, China Futures Association, China Association for Public Companies, and Payment & Clearing Association of China jointly issue the following risk alert:

I. Correctly understand the essential attributes of virtual currencies, real-world asset tokens, and related activities

Virtual currencies are not issued by monetary authorities, are not legal tender, do not have the same legal status as legal tender, and cannot be used as currency in circulation within China. Among them, “air coins” such as Pi Coin lack substantive technological innovation, have no clear commercial application scenarios or value, have opaque issuance and operation mechanisms, serious issues of fraud and market manipulation, and are often associated with pyramid schemes and fraud activities under their name. Stablecoins cannot currently meet requirements for customer identity verification, anti-money laundering, etc., and are at risk of being used for money laundering, fundraising fraud, illegal cross-border transfers of funds, and other illegal activities. Real-world asset tokenization involves financing and trading activities through the issuance of tokens or other rights and debt certificates with token characteristics, and carries multiple risks, including fake asset risks, business failure risks, and speculation risks. Currently, no real-world asset tokenization activities have been approved by China’s financial regulatory authorities.

Domestic institutions and individuals conducting activities such as exchanging legal tender for virtual currencies, issuing and financing real-world asset tokens within China, are suspected of illegal issuance of token securities, illegal fundraising, unauthorized public offering of securities, illegal operation of futures business, and other illegal financial activities. Overseas virtual currency and real-world asset token service providers that directly or indirectly provide related services within China are also engaging in illegal financial activities. Domestic staff of relevant overseas virtual currency service providers, as well as domestic institutions and individuals who knowingly or should know that they are engaging in virtual currency–related businesses and still provide services to them, will be held legally responsible according to the law.

II. Relevant institutions must not engage in businesses related to virtual currencies or real-world asset tokens

All member units must not participate in the issuance or trading of virtual currencies or real-world asset tokens within China, nor directly or indirectly provide related services for clients issuing or trading virtual currencies or real-world asset tokens within China. Member units that are banks or payment institutions must not provide services for the issuance or trading of virtual currencies or real-world asset tokens within China, nor provide any form of financial services or credit support to virtual currency “mining” enterprises and projects. They must strictly conduct customer due diligence, promptly assess whether there are risks of virtual currency or real-world asset token trading or money laundering, ensure their business activities comply with regulatory requirements, and take action and report to relevant authorities if suspicious clues are found. Member units that are securities, fund, or futures institutions must not provide services for the issuance or trading of virtual currencies, real-world asset tokens, or related financial products within China. Member units that are internet platform companies must not provide any form of marketing, publicity, information technology, or other services for the issuance or trading of virtual currencies or real-world asset tokens within China, and must strictly conduct compliance screening of platform-published information. All member units should carry out comprehensive risk alerts and warning education on virtual currencies and real-world asset tokens, reminding the public to clearly recognize risks and stay away from illegal activities.

III. The public should be highly alert to all forms of virtual currency and real-world asset token business activities

Virtual currency prices are highly volatile and fluctuate sharply, and are often used for speculation, pyramid schemes, and other illegal activities. The public is urged to strengthen their awareness and ability to identify risks, safeguard their own “wallets,” and refrain from participating in activities related to virtual currencies, real-world asset tokens, as well as illegal fundraising and illegal issuance of securities under the guise of cryptocurrency “mining.” Stay away from virtual currencies and real-world asset tokens to avoid being involved in illegal activities. Beware of joining groups promoting virtual currency or real-world asset token business activities, be alert to false promotions containing historical returns, trading advice, or speculation prospects for virtual currencies or real-world asset tokens, and refuse to click on links, QR codes, or other access channels related to overseas virtual currency or real-world asset token trading platforms. If you discover any clues involving business activities related to virtual currencies or real-world asset tokens, promptly report them to the relevant regulatory authorities. If suspected criminal activities are involved, promptly report them to the public security authorities.