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FinTechs belonging to this category offer financial services using crypto currencies. This category also includes FinTechs utilising blockchain and distributed ledger technologies (DLT) upon which Bitcoin and Ethereum are based, among others. FinTechs develop and do research in this field in order to create new services – e.g. crypto currency exchange markets, wallet providers, NFTs-related services, new payment services, "smart contracts" or new clearing and settling services.
Introduction
Attitude of the country towards financial services using crypto currencies
The government does not deem crypto currencies as legal currency. It banned the exchange between crypto currencies and legal currencies and the trading among crypto currencies themselves in 2017. This regulatory attitude stays unchanged until today.
Legal affairs
Obligations and requirements to provide financial services using crypto currencies described above
In China, the legal tender is Renminbi. Further, it is expressly described in the applicable laws and regulations that crypto currency is a virtual good and not a currency and therefore shall not be used and exchanged in the market as such.
On 4 September 2017, the Chinese government issued an announcement to prevent the risk relating to ICO and token-based financing (ICO Ban). The ICO Ban stipulates that every ICO and token-based financing platform shall not engage in the exchange between any legal currency with tokens and crypto currency, shall not trade or trade as central counterparties with the tokens or crypto currency, and shall not provide pricing, information agency or other services for tokens or crypto currency. A platform which violates the ICO Ban will be taken off the app store.
In 2018 and 2021, the governments and industry associations further issued several regulations or announcements to continue cracking down the usage of crypto currency. They reiterated that the financial institutions and payment clearing institutions should not carry out businesses related to crypto currencies and appealed to the public that they shall not participate in speculative crypto currency transactions.
In summary, after the issuance of ICO Ban, crypto currency and the provision of financial services using crypto currency are strictly prohibited in China.
Additional comments regarding the legal situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
Crypto currency is prohibited, and we understand that it is hard to develop business in this area in China legally.
Economic conditions
Market size for financial services using crypto currencies and biggest companies in this business area
N/A.
Additional comments regarding the economic situation for financial services using crypto currencies or what FinTech’s must be aware of in this business area
According to current laws and regulations, the services provided by an overseas virtual currency exchange to China’s residents via the Internet are also illegal financial activities. Therefore, FinTechs need to be cautious when providing cross-border trading services to Chinese consumers.