Global regulatory trends for crypto assets and China's response

Author Profiles: Deng Jianpeng, Professor and Doctoral Supervisor, School of Law, Central University of Finance and Economics, and Director of the Center for Fintech Rule of Law; Ma Wenjie, Doctoral Candidate, School of Law, Central University of Finance and Economics.

This article was first published in the Journal of Shandong University (Philosophy and Social Sciences) in 2025.

Abstract

With the booming development of crypto assets, global regulatory paradigms are rapidly diverging. Developed economies, represented by the European Union, the United States, the United Kingdom, and Hong Kong, are actively formulating or updating relevant regulatory policies. China previously adopted a "complete ban" regulatory strategy for crypto assets, which temporarily curbed domestic speculation and controlled financial risks. However, given the rapid evolution of the cryptoasset ecosystem and international regulatory policies, prohibitive regulation is unlikely to be realistic. The structural conflict with global cryptoasset development is becoming increasingly apparent, potentially inhibiting blockchain financial innovation and wealth creation, leading to significant inadequacies in the protection of legitimate holders' rights and interests, and weakening my country's voice in international rule-making. my country can balance financial security with financial efficiency, re-examine the economic function and strategic value of cryptoassets, and promote a phased "moderate opening" of regulatory policies. Specifically, it can implement categorized regulation based on the risk characteristics of cryptoassets, incorporate cryptoasset activities into the compliance regulatory framework, and incorporate cryptoasset reserves into the national new economic development strategy. This will help China gain a commanding position in the new round of global digital financial competition and propel China towards becoming a financial powerhouse. Keywords: Crypto assets; Bitcoin reserves; Stablecoins; Classified regulation; Financially Powerful Nation In recent years, the global cryptoasset market has entered a period of rapid development, rapidly evolving from a marginal sector to a vital component of the global financial system and investment landscape. Developed economies such as the United States, the European Union, the United Kingdom, Japan, Singapore, the United Arab Emirates, and Hong Kong have already formulated or are in the process of formulating regulatory policies for cryptoassets, incorporating them into their new economic development strategies. The EU's Markets in Cryptoassets Directive, which came into effect in 2024, implements risk-based categorized regulation of cryptoassets. In 2025, the US government announced the establishment of a strategic Bitcoin reserve and a US digital asset reserve, and enacted the "Guiding and Establishing National Innovation for U.S. Stablecoins Act" (GENIUS Act) into federal legislation, requiring stablecoins to be funded by US dollars or short-term US Treasury bonds. In 2024, the Hong Kong Special Administrative Region (HKSAR) began promoting the licensing of mainstream crypto asset exchanges and the implementation of Bitcoin and Ethereum ETFs, and passed the Stablecoin Bill in 2025. China's financial regulatory authorities have previously established a prohibitive regulatory framework through administrative normative documents such as the "Notice on Preventing Bitcoin Risks" (2013), the "Announcement on Preventing Risks in Token Issuance and Financing" (2017), and the "Notice on Further Preventing and Addressing Risks of Crypto-Asset Trading Speculation" (2021), as well as the Supreme People's Court's Guiding Case No. 199. These documents designate crypto-asset transactions as "illegal financial" activities, prohibit the use of fiat currency to denominate Bitcoin, prohibit Bitcoin "mining," and effectively eliminate and crack down on the entire crypto-asset industry chain. These prohibitive policies have effectively curbed domestic crypto-asset speculation and prevented related financial risks. However, as the market evolves, their controversial nature has gradually emerged, attracting the attention of a small number of researchers. On the one hand, influenced by these administrative normative documents, judicial authorities have been ambiguous and vacillating in their determination of the legal nature of crypto-assets. In the absence of formal legislation denying the legality of crypto-assets, the civil rights protection of legitimate crypto-asset holders is severely lacking. Some civil cases involving crypto-assets have been dismissed by courts on the grounds of "own risk," leading to a widespread phenomenon of differing judgments in civil and criminal cases. Furthermore, with the explosive growth of new crypto-assets such as stablecoins in recent years, the prohibitive regulations of a single sovereign state are unable to address the challenges posed by crypto-assets and no longer meet the minimum intrusiveness requirements of financial regulation. In particular, since 2025, developed economies, represented by the United States, have incorporated crypto-assets into their new economic development strategies, re-examining and adjusting their regulatory strategies and enacting specialized legislation targeting stablecoins, aiming to gain a competitive advantage in the new blockchain financial "arms race." The global crypto-asset industry is undergoing rapid "industry innovation" and "rule reshaping." Against this backdrop, the structural conflict between my country's prohibitive regulation and the global development of crypto-assets is becoming increasingly apparent, potentially no longer complying with the "principle of proportionality" in financial regulation. This critical issue has yet to receive sufficient attention from domestic financial regulators and legal scholars. "When laws adapt to the times, there is order; when governance adapts to the world, there is success." How to timely adjust my country's policies in line with international cryptoasset development trends and build a cryptoasset regulatory framework that balances financial security and innovation and inclusion is a strategic issue that China urgently needs to consider. Compared with existing domestic research, this article's innovations are primarily reflected in two aspects: First, it provides new and effective materials, systematically examining the recent development and innovation of the cryptoasset ecosystem, as well as new regulatory policies in developed economies, and analyzing their trends and key policy points. Second, it proposes clear and highly practical optimization paths for existing regulatory policies. Prohibitive regulation is essentially a continuation of "financial repression" policies, which have limitations in terms of financial development and innovation, financial consumer protection, and international governance rule-making. This article proposes, from both theoretical and practical perspectives, a policy adjustment from "complete prohibition" to a phased "moderate opening."

I. Concept of Crypto-Assets and Regulatory Needs

(I) Concept and Ecosystem of Crypto-Assets

Currently, there is no fully unified international consensus on the concept and classification of crypto-assets. Crypto-assets are often confused with concepts such as virtual currencies, private digital currencies, virtual assets, digital assets, and tokens. However, in recent years, international organizations such as the Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Basel Committee on Banking Supervision (BCBS) have frequently used the term "crypto-assets" in their regulatory policy recommendations and official documents. This article uses the term "crypto-asset," without distinguishing it from "virtual currency" in my country's regulatory documents. It refers to assets such as Bitcoin, Ethereum, and Tether that are issued by non-monetary authorities, utilize encryption and blockchain-based distributed ledgers, or similar technologies, and exist in digital form. Bitcoin, launched in 2009, is a typical decentralized, privately issued crypto-asset. Bitcoin features a decentralized, peer-to-peer value transfer method based on a shared public ledger (a public blockchain using distributed ledger technology). It is not backed by any asset. Its original purpose was to enable transactions between individuals without a trusted third party by aligning the incentives of network participants and addressing the technical challenge of "double spending." Since the launch of Bitcoin, the crypto ecosystem has rapidly expanded, attracting new market participants and creating a self-reinforcing cycle that has driven crypto-asset prices higher. Centralized exchanges have played a key role in channeling capital into the cryptoasset sector and facilitating the exchange of cryptoassets for fiat currencies. Subsequently, Ethereum was launched in 2015. Its core innovation lies in the introduction of smart contracts, enabling developers to deploy a variety of decentralized applications on-chain and enabling conditionally triggered automated trade execution. This has fueled the boom of decentralized finance (DeFi). Decentralized finance is a new ecosystem for providing crypto services, enhancing transparency and reducing costs by eliminating financial intermediaries. Decentralized finance protocols combine various smart contracts to provide lending, borrowing, and trading services within the crypto ecosystem. Cryptoasset holders can use assets such as Ether to engage in decentralized financial transactions, lending, and other financial activities. Stablecoins, meanwhile, are a key component of decentralized finance. Their price remains relatively stable relative to the fiat currency to which they are pegged, serving as a payment and transaction medium for fiat currencies within the crypto ecosystem. (II) Risks of Crypto-Assets and Regulatory Motivations The "shadow finance" functions of crypto-assets and decentralized finance share many vulnerabilities with traditional financial markets and present new challenges to existing financial regulation. The regulatory motivations and objectives for the crypto-market primarily include safeguarding national financial security and protecting the rights of financial consumers; maintaining financial market stability; and combating financial crimes such as fraud, manipulation, money laundering, and terrorist financing. First, crypto-assets challenge the legal tender system. In particular, stablecoins pegged to the US dollar may pose the risk of replacing other countries' legal tender and accelerating cross-border capital flows. Crypto-assets objectively circumvent the existing legal tender system, the banking system, and third-party payment systems, establishing an entirely new monetary and payment system. The International Monetary Fund uses the term "cryptoisation" to refer to the substitution of domestic legal tender by crypto-assets. Specifically, investors in some countries hold significant amounts of crypto assets, and crypto assets (primarily US dollar-denominated stablecoins) are replacing local currencies. These stablecoins are displacing local currencies and assets and circumventing exchange rate and capital controls. This will reduce monetary authorities' ability to regulate liquidity in the economy, impacting the transmission channels of monetary policy and weakening its effectiveness. It could even spread to other regulated entities or the real economy, triggering systemic risks. Secondly, crypto assets are easily used as tools for illicit activities and face the dilemma of difficult accountability. The crypto ecosystem has seen the emergence of products and services such as crypto assets that enhance anonymity, mixers, decentralized platforms and exchanges, and privacy wallets. These tools reduce the transparency of financial flows and exacerbate information obfuscation, fostering the risks of tax evasion, money laundering, terrorist financing, fraud, and market manipulation. Compared to traditional financial transactions, crypto assets and decentralized finance suffer from significant off-chain information gaps. For example, the identities, technical backgrounds, and compliance records of developers and traders are often hidden, making it difficult for users to discern their credibility or motivations, significantly amplifying information asymmetry risks. Furthermore, the decentralized nature of blockchain contrasts starkly with the centralized structure of the financial regulatory system, making it difficult for regulators to control risks through traditional financial intermediaries. The anonymity and cross-border nature of crypto assets complicate regulation and tracking, exposing investors' funds to significant risks and posing significant challenges for regulators and law enforcement. Thirdly, crypto assets may exacerbate financial risks. One of the most popular uses of crypto assets is for investment (speculation) and trading (hype). The crypto asset issuance, trading, exchange, and storage markets, as well as related products, tools, intermediaries, applications, and technologies, have experienced explosive growth, with both retail and institutional usage significantly expanding. The global investor base for crypto assets continues to expand. According to the "2024 Crypto Wealth Report" released in collaboration with the UK consulting firm Henley & Partners, the crypto asset market has experienced significant wealth creation and expansion, with increases in the number of wealthy individuals, total users, and overall market capitalization. By the end of June 2024, there were 560 million crypto-asset users worldwide, with 172,300 holders of crypto assets worth over $1 million. With the rapid growth of crypto market participation and volume, crypto assets are increasingly interconnected with traditional finance and the real economy, raising concerns about potential spillover effects on financial stability among regulators. The failure of key service providers in the crypto-asset ecosystem, such as crypto-asset exchanges, can quickly transmit risks to other parts of the ecosystem. The price volatility of crypto-assets, coupled with leveraged trading, liquidity mismatches, and interconnectedness with the traditional financial system, can easily amplify financial systemic risks. These challenges and risks reinforce the need for global regulation of crypto-assets. The rapid expansion of the crypto-asset market has sparked concerns about inadequate financial consumer protection mechanisms and potential impacts on financial stability. Financial regulators worldwide are accelerating legislation for crypto-asset-related activities. Amidst emerging trends in cryptoasset regulation, the regulatory practices of the following countries or regions deserve close attention. (I) The Core Implications of New Regulatory Policies in Developed Economies First, the EU's unified legislation and risk-based regulation. In May 2023, the European Council voted to approve the Markets in Crypto Assets (MiCA) Act. MiCA provides a comprehensive regulatory framework for the EU cryptoasset market. Following a categorized regulatory approach, MiCA provides detailed provisions on the definition and use of cryptoassets, licensing requirements for cryptoasset issuers and service providers, operational management of cryptoasset issuers and service providers, reserve and redemption management by cryptoasset issuers, and anti-money laundering oversight of cryptoasset trading activities. It is the most comprehensive global regulation on cryptoassets to date. MiCA categorizes crypto assets into asset-referenced tokens (EMTs), e-money tokens (ARTs), and other crypto assets, and establishes differentiated regulatory rules. EMTs and ARTs are the primary types of crypto assets regulated by MiCA. Notably, MiCA does not cover crypto assets that qualify as other regulated instruments, such as DeFi, NFTs, and security tokens, nor does it cover central bank digital currencies (CBDCs). Regarding regulatory targets, MiCA primarily regulates the establishment and operations of crypto asset issuers and crypto asset service providers. Second, the United States' crypto asset promotion policies and strategic reserve program. In March 2022, the United States issued the "Executive Order on Ensuring Responsible Development of Digital Assets," establishing a federal digital asset development strategy for the United States, supporting digital asset development and positioning the United States as a leader in blockchain innovation and digital asset technology. In 2024, the U.S. Securities and Exchange Commission (SEC) approved Bitcoin and Ethereum spot ETFs, attracting significant capital inflows from traditional investment institutions. In January 2025, newly elected U.S. President Trump signed an executive order titled "Strengthening American Leadership in Digital Financial Technology," announcing the establishment of a new digital asset regulatory system. This order mandates the protection of public blockchain access and the freedom of digital assets. It also establishes a presidential "Digital Asset Markets Task Force" to oversee the issuance and operation of U.S. digital assets. It also establishes a "Digital Asset Committee," prohibits the issuance of central bank digital currencies, and promotes legislative considerations such as the establishment of a Bitcoin strategic reserve, aiming to transform the United States into the "world capital of cryptocurrency." In March 2025, Trump signed an executive order establishing the Strategic Bitcoin Reserve and the U.S. Digital Asset Stockpile, adding approximately 200,000 confiscated Bitcoins to the national reserve. By supporting U.S. dollar-stablecoin-cryptocurrency market cycles, Trump also strengthened the dollar's role in global cryptocurrency trading. In July 2025, the US Congress finally voted to pass the "National Innovation Act to Guide and Establish a US Dollar Stablecoin," which will take effect after being signed by the President. This bill establishes clear rules for the issuance, reserve requirements, transparency, and oversight of dollar-backed stablecoins, thereby solidifying the peg between digital stablecoins and the US dollar. Simultaneously, the US House of Representatives passed the "Digital Asset Market Clarity Act of 2025" (the "CLARITY Act"). This bill categorizes digital assets into digital commodities, investment contract assets, and non-commodity collectibles, clarifying the controversial nature of crypto assets and establishing a clear regulatory framework: the CFTC will oversee the digital commodity spot market, while the SEC will be responsible for securities issuance and anti-fraud enforcement. The US government's policy supports the compliant and innovative development of crypto assets, while integrating the crypto market into the US financial system and tying it to the US dollar system (the US dollar and Treasury bonds) through stablecoins. This bill leverages stablecoins to strengthen the US dollar's position in the international monetary system, increase global acceptance and demand for digital payments using the US dollar, and help the US control the future of digital finance and strengthen its financial dominance. Its strategic intentions deserve my country's high attention. Third, Hong Kong, China, has crypto-friendly policies. In October 2022, as a key window into my country's financial opening, the Hong Kong SAR government issued the "Policy Statement on the Development of Virtual Assets in Hong Kong," outlining the SAR's macroeconomic policies and development direction for crypto assets in Hong Kong, bolstered by technological trends such as distributed ledger technology (DLT) and Web 3.0. It also outlined principles for sandbox regulation of crypto assets, including the issuance of non-fungible tokens (NFTs), digital issuance of green bonds, and the digital Hong Kong dollar. The Financial Services and the Treasury Bureau (FSTB) of the Hong Kong SAR government also issued the "Policy Statement on the Development of Virtual Assets in Hong Kong" in October 2022, outlining the regulatory vision and policy direction for virtual/digital asset activities under the principle of "same business activities, same risks, same supervision." In June 2023, the Hong Kong SAR government established a working group to promote the development of Web3. Since 2024, the Hong Kong Special Administrative Region (HKSAR) has shifted its previously stringent regulatory approach and implemented a licensing system for trading mainstream crypto assets (Bitcoin and Ethereum). Security tokens are now subject to the Securities and Futures Ordinance, while non-security tokens are subject to anti-money laundering regulations. The region has also successfully explored the listing and trading of Bitcoin and Ethereum exchange-traded funds (ETFs). In May 2025, the Legislative Council of the HKSAR passed the Stablecoin Bill, establishing a licensing system for fiat-denominated stablecoin issuers in Hong Kong, China, with implementation scheduled for August 1st. In June 2025, Hong Kong released the "Hong Kong Digital Asset Development Policy Statement 2.0," which outlined the "LEAP" framework, encompassing four key strategies: optimizing legal and regulatory oversight, expanding the range of tokenized products, promoting application scenarios and cross-sector collaboration, and developing talent and partnerships. It also explicitly mandated the regularization of government bond tokenization and the promotion of tokenization of real-world assets such as precious metals, non-ferrous metals, and renewable energy, reaffirming Hong Kong's commitment to becoming a global innovation hub for digital assets. (II) Analysis of Policy Characteristics of Developed Economies In July 2023, the Financial Stability Board (FSB), drawing on the experience of institutions in various jurisdictions in implementing international standards, released the final report of the FSB Global Regulatory Framework for Crypto-asset Activities, proposing overarching principles for regulatory recommendations: First, the "same business, same risks, same regulation" principle. If crypto-asset businesses have the same economic functions as traditional financial businesses and are associated with the same types of financial risks, they should be subject to the same regulatory requirements. Second, the principle of flexibility. Regulatory authorities in various economies can apply existing laws and regulations to the crypto-asset industry, or they can enact new laws and regulations to implement the relevant regulatory recommendations. Third, the principle of technological neutrality. Regulatory authorities in various economies should regulate crypto-asset businesses based on their economic functions and risk profiles, rather than their underlying technologies. Based on the aforementioned international standards, developed economies have issued proposals or formally enacted legislation related to crypto-asset activities, generally demonstrating the following characteristics. First, a crypto-asset-friendly regulatory attitude and framework. In the early days of crypto-asset development, regulatory policies varied across countries, with varying emphasis on balancing innovation and risk. However, developed economies have recently reexamined and adjusted their regulatory strategies for crypto-asset operations, actively guiding and fostering a crypto-asset-friendly regulatory attitude and framework. US President Trump has significantly shifted his stance toward non-sovereign cryptocurrencies, from "Bitcoin is a scam competing with the US dollar" to "Bitcoin does not pose a threat to the US dollar," adopting a proactive and inclusive policy toward crypto-assets. The Trump administration has explicitly rescinded the previous Digital Assets Executive Order and the Treasury Department's Framework for International Engagement on Digital Assets, arguing that these laws stifle innovation and undermine US economic freedom and global leadership in digital finance. Regulatory policies in developed economies are shifting from piecemeal rules to a systematic framework, demonstrating a crypto-asset-friendly policy stance and attracting capital or funds by increasing policy certainty. Secondly, strengthening anti-money laundering and countering the financing of terrorism (AML/CFT) compliance requirements. AML and countering the financing of terrorism are core elements of crypto-asset regulation. Regulators in developed economies typically base their approach on the standards of the Financial Action Task Force on Money Laundering (FATF), using crypto-asset service providers as a regulatory focus and requiring strict implementation of AML and CFT measures. In June 2019, the FATF updated Recommendation No. 15 and its interpretative notes and issued the "Guidance for a Risk-Based Approach for Virtual Assets and Virtual Asset Service Providers," applying AML and CFT measures to virtual assets (VAs) and virtual asset service providers (VASPs). A key requirement is the "Travel Rule," which requires countries to ensure that originating virtual asset service providers (VASPs) can instantly and securely obtain, hold, and exchange information about senders and recipients of transactions, and, when necessary, securely transmit it to the receiving VASP or relevant financial institution. The FATF's recommendations on AML regulation of crypto assets are considered a bellwether for global AML laws. Developed economies such as the United States, the European Union, Japan, and Singapore are strengthening AML regulation of crypto assets through institutional harmonization and enforcement, gradually establishing the foundation of a compliance system centered on VASPs. The FATF's 2025 "Special Update on the Implementation of the Standards for Virtual Assets and Service Providers" shows that in its 2025 survey, 73% of the surveyed jurisdictions (85 of 117 jurisdictions, excluding those that explicitly prohibit or plan to prohibit VASPs) have passed legislation implementing the "Travel Rule." Third, it emphasizes risk-based, categorized regulation. Developed economies often use the "same business, same risk, same regulation" principle proposed by the Financial Stability Board for categorized regulation. A common categorization is based on whether cryptoassets attempt to stabilize their value by referencing other assets. Cryptoassets with stabilization mechanisms are called "stablecoins," while those without are called "unbacked crypto-assets." For stablecoins with stabilization mechanisms, MiCA further categorizes them into two types based on the underlying assets: asset-referenced tokens (pegged to one or more fiat currencies, commodities, cryptoassets, or a combination of these) and e-money tokens (pegged to a fiat currency), and sets differentiated regulatory rules. Furthermore, many countries and regions are actively promoting the application of securities laws to cryptoassets, distinguishing cryptoassets with characteristics of financial instruments (including securities) from other cryptoassets. The former, sometimes referred to as "security tokens," may be considered for regulatory compliance with the same regulations as issuers of financial instruments and securities. In its 2018 guidance on the regulatory framework for initial coin offerings (ICOs), the Swiss Financial Market Supervisory Authority (FINMA) categorizes crypto assets into three categories: payment tokens, utility tokens, and asset tokens. Based on their functionality, FINMA defines payment tokens as "non-securities" payment methods, more akin to currencies; asset tokens as "securities" closer to financial products; and utility tokens as having additional investment purposes, each subject to a different regulatory framework. Of course, these categorizations are not clear-cut. For example, the Securities and Futures Commission (SFC) of the Hong Kong Special Administrative Region (HKSAR) noted that the terms and features of crypto assets may evolve over time, and non-security tokens may become security tokens and vice versa. The SFC also recommended that crypto asset service providers, out of "prudence," apply licenses for both asset classes. III. Characteristics and Limitations of my country's Prohibitionary Policies (I) The Phased Evolution of Prohibitionary Policies The potential risks of crypto assets necessitate the intervention of financial regulators. China has gradually expanded the scope of prohibitionary regulation, as detailed below. The first phase is the risk warning phase. To protect public property rights and prevent money laundering risks, in December 2013, the People's Bank of my country and other departments issued the "Notice on Preventing Bitcoin Risks" (Yinfa [2013] No. 289), clarifying that Bitcoin is not a currency but a specific virtual commodity. As an online commodity trading activity, ordinary citizens have the freedom to participate at their own risk. Regulators generally adopted a wait-and-see approach in the early stages of crypto-asset development, recognizing Bitcoin as legal property and allowing limited on- and off-exchange trading. The second phase focused on addressing risks. In 2017, Initial Coin Offerings (ICOs) became a global phenomenon, with many projects raising funds by issuing tokens on Ethereum. In an ICO, the sponsor sells a token (cryptoasset) to a group of investors and accepts fiat currency or mainstream cryptoassets like Bitcoin. Cryptoassets issued through ICOs are similar to traditional stocks or debt securities, granting holders the right to assert specific property rights against the issuer. Consequently, they are also known as "security tokens" and "utility tokens." However, in many cases, unregulated and unconstrained ICOs have become a means for scammers to engage in illegal financial activities. ICOs are commonly suspected of illegally absorbing public deposits or engaging in fundraising fraud. ICOs inflate token prices and then quickly sell them for a profit, leaving investors with significant losses. In September 2017, the People's Bank of China and other ministries and commissions issued the "Announcement on Preventing Risks in Token Issuance and Financing," which clearly prohibited any organization or individual from engaging in illegal token issuance and financing activities. All types of token issuance and financing activities should be immediately halted, prohibiting financial payment institutions from participating in crypto asset businesses and requiring the withdrawal of domestic exchanges. This had a significant effect on curbing related financial risks in the short term. The third phase is a comprehensive ban. In May 2021, the Financial Stability and Development Committee of the State Council held its 51st meeting, proposing to resolutely prevent and control financial risks and crack down on Bitcoin "mining" and trading. Subsequent regulatory policies quickly implemented the spirit of this meeting. In September 2021, the National Development and Reform Commission and other departments issued the "Notice on Rectifying Virtual Currency "Mining" Activities," which designated mining as an industry to be eliminated, strictly prohibited new mining projects, and strengthened oversight of the entire upstream and downstream crypto asset "mining" industry chain. The "Notice on Further Preventing and Addressing the Risks of Virtual Currency Trading Speculation," issued by the People's Bank of China and other ministries and commissions in September 2021, emphasized that crypto-asset-related business activities constitute illegal financial activities and are strictly prohibited and resolutely outlawed in accordance with the law. This also includes services provided by overseas exchanges to domestic residents as illegal financial activities. Notably, the Supreme People's Court, the Supreme People's Procuratorate, and the Ministry of Public Security have been added to the list of issuing authorities for the "Notice on Further Preventing and Addressing the Risks of Virtual Currency Trading Speculation." Financial regulatory rules have a significant direct impact on law enforcement and judicial adjudication. The notice also clarifies that any legal person, unincorporated organization, or individual investing in crypto assets and related derivatives that violates public order and good morals will have their relevant civil acts invalidated, and any resulting losses will be borne solely by the individual. In February 2022, the Supreme People's Court amended its "Interpretation on Several Issues Concerning the Specific Application of Laws in the Trial of Criminal Cases of Illegal Fundraising" (Fa Shi [2022] No. 5), explicitly listing "virtual currency trading" as a form of illegal fund-raising, providing a clear basis for judicial authorities to combat such crimes. In August 2024, the Supreme People's Court and the Supreme People's Procuratorate jointly issued the "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Money Laundering Cases," which for the first time explicitly listed "transferring and converting criminal proceeds and their proceeds through 'virtual asset' transactions or financial asset exchanges" as money laundering. my country has adopted a cautious approach to the risks associated with crypto assets, adopting a relatively negative characterization of crypto assets, ultimately adopting a prohibitive regulatory approach. This prohibitive regulation encompasses three dimensions: First, administrative oversight prohibits the entire industry chain. At the issuance level, the creation of crypto assets through mining or the issuance of ICOs is prohibited. At the transaction level, any domestic or foreign entity is prohibited from providing crypto asset services such as custody, settlement, exchange, investment, and information consulting to domestic residents. Second, at the criminal level, crypto assets are closely linked to illegal and criminal activities. Based on administrative regulations clarifying the illegality of crypto-asset trading activities, judicial interpretations have been used to include specific crypto-asset trading activities in the categories of criminal activities such as illegal fundraising and money laundering, thereby reinforcing the "illegality" of crypto-asset trading activities and the "legitimacy" of prohibited activities. Third, there is a lack of protection at the civil judicial level. The influence of prohibitive regulation has permeated and spread from administrative supervision to the judicial level, sending a signal to society regarding the illegality of crypto-asset trading and the importance of risk prevention and control. Regulatory authorities or judicial organs tend to declare civil acts such as entrusted crypto-asset investment invalid due to violations of public order and good morals, and fail to provide relief and protection for the losses of relevant investors. This further leverages the dynamic role of financial justice and strengthens the coordinated governance of financial justice and financial supervision. (II) Limitations of my country's Prohibitive Regulatory Policy my country's phased and gradual expansion of the scope of prohibitions on crypto-assets has played an important role in combating domestic speculation, combating cryptocurrency-related illegal and criminal activities, and managing financial risks. However, with the rapid evolution of the cryptoasset ecosystem and international regulatory trends, the limitations of prohibitive regulation have become increasingly apparent. First, the legal basis for prohibitive regulatory norms is questionable. The "Notice on Preventing Bitcoin Risks," the "Announcement on Preventing Risks in Token Issuance and Financing," and the "Notice on Further Preventing and Addressing Risks of Virtual Currency Transaction Speculation" form the regulatory foundation for cryptoasset regulation. In terms of the drafting bodies and procedures, these documents were all jointly formulated and issued by the People's Bank of China and other ministries and commissions. The legislative process was relatively simple and did not meet the high standards for rulemaking set out in the "Regulations on the Procedures for the Formulation of Regulations." Therefore, they can only serve as "normative documents below the level of regulations" in terms of legal effect. According to Article 80 of my country's Legislation Law, regulations may not grant self-authorization, diminish citizens' rights and freedoms, or increase their obligations without the provisions of laws or administrative regulations. Therefore, normative documents do not have the authority to directly create provisions that diminish citizens' rights or increase their obligations, otherwise their legitimacy will be questionable. The "Notice on Further Preventing and Addressing the Risks of Virtual Currency Transaction Speculation" states that crypto-asset-related business activities "are suspected of engaging in illegal financial activities such as the illegal issuance of tokens and tickets, unauthorized public offerings of securities, illegal futures operations, and illegal fundraising," and should be "strictly prohibited and resolutely outlawed in accordance with the law." In practice, crypto-asset-related business activities are complex and diverse. Regulatory documents' blanket, non-legal and prohibitive provisions for crypto-asset-related businesses, which exclude the obligation to investigate and adjudicate individual cases, have resulted in the prohibition of some legal activities. Furthermore, these prohibitive provisions deprive market entities of their individual freedom to participate in crypto-asset transactions, potentially inappropriately diminishing citizens' rights and raising concerns about their legitimacy. Secondly, prohibitive regulation has failed to effectively protect the rights of financial consumers and has even exacerbated the difficulties faced by legitimate crypto-asset holders. Due to policy reservations and abstract language, regulations in the crypto-asset sector are generally not systematic, stable, or clear, leading to divergent understandings of regulatory policies in practice. Influenced by strict regulatory oversight, judicial authorities have developed skewed understandings of the legal nature of crypto assets, leading to a proliferation of differing judgments in similar cases, raising public concerns. Regarding the legal nature of crypto assets, some courts have recognized them as legally protected "virtual property," while others have deemed them illegal or illicit. Regarding the validity of civil legal acts involving crypto assets, there are two perspectives: "valid" and "invalid." Especially after the promulgation of the 2021 "Notice on Further Preventing and Addressing the Risks of Speculation in Virtual Currency Transactions," courts have tended to cite this regulatory document, declaring crypto asset entrusted investment contracts invalid for violating "public order and good morals" under Article 153, Paragraph 2, of the Civil Code. Regarding the issue of discounted compensation and enforcement in crypto asset cases, some arbitration institutions support "returning in lieu of return in fiat currency." However, the Supreme People's Court's Guiding Case No. 199 highlights that arbitration awards awarding compensation in fiat currency equivalent to the value of Bitcoin violate national financial regulations and the public interest. While this approach to adjudication aligns with administrative regulations regarding a blanket ban on virtual currencies, it is detrimental to protecting and remedying the legitimate rights and interests of cryptoasset investors and may even foster adverse selection and increase moral hazard. my country's current prohibitive regulatory policies have led some judicial authorities to perceive cryptocurrency speculation as illegal, or even as illegal activities involving cryptocurrency, automatically linking cryptocurrency transactions with criminal activity. This has had widespread negative impacts on legitimate cryptoasset holders in some regions, with some public security agencies, for example, seizing the cryptoassets of individuals without legal basis. Furthermore, cryptoasset cases, due to their widespread public involvement and the high value of the property involved, often involve confiscation charges such as organizing and leading pyramid schemes and operating casinos. These two factors have led to increased judicial crackdowns on cryptoasset activities, potentially leading to problems such as "distant-sea fishing" and profit-driven law enforcement. Some public authorities have handed over large sums of confiscated cryptoassets to third-party companies for sale, leading to serious problems such as profiteering. The verdict in the "Wallet+" (Plus Token) online pyramid scheme, known as the "number one Ponzi scheme" in the cryptocurrency world, reveals that after the incident, investigative authorities seized 194,775 Bitcoins and 833,083 Ethereum tokens. The defendant, Chen, applied to the public security authorities to entrust a Beijing technology company to legally sell and liquidate the crypto assets seized overseas, with all proceeds being considered as restitution. The proceeds and profits were confiscated and turned over to the state treasury. This approach faces significant legal and rationale challenges. First, the exchange of crypto assets for legal tender in my country is considered illegal financial activity. This regulation also restricts state agencies, and even if judicial authorities intervene in the transaction, the illegal nature of the activity remains unchanged. Second, my country prohibits financial institutions or related platforms from engaging in cryptocurrency-related business. Therefore, it is impossible to find official institutions or professional organizations in China to handle the business. Consequently, it is necessary to seek overseas trading platforms to handle the business. This is inconsistent with the functions, legal nature, and requirements of my country's public security and judicial institutions. Furthermore, this approach lacks effective oversight and is prone to fostering occupational crimes and profiteering. Third, prohibitive regulation stifles financial innovation and public wealth benefits in the cryptoasset industry. While my country's regulatory policies have curbed risks, they have also hindered numerous applications of blockchain technology in areas such as cross-border payments (such as stablecoins), the tokenization of real-world assets (RWAs), decentralized finance, and stock tokenization. Furthermore, financial institutions and technology research and development institutions, as market entities focused on efficiency, are forced by policy uncertainty to divert resources originally allocated to compliance-focused technological innovation to offshore structures in order to circumvent regulation, potentially hindering financial innovation. Amidst the global trend of devaluing fiat currencies and increasingly frequent capital controls, mainstream cryptoassets have gradually become important global asset allocation tools and channels for preserving personal wealth. While the United States has clearly established a Bitcoin and cryptoasset reserve strategy, my country's prohibitive regulation has cast a shadow over cryptoassets' perceived illegality, objectively depriving individuals, businesses, and even the nation of this crucial anchor asset. Citizens, market entities, and even public authorities within China face significant restrictions and severe institutional barriers to the legality of holding, trading, and disposing of cryptoassets. This makes it difficult for them to participate in the cryptoasset market or share in investment returns, leading to development difficulties in the global digital asset market. This could even severely impact a country's citizens' wealth accumulation and financial returns, and even affect its financial security. Fourth, prohibitive regulation leads to insufficient participation in international governance and weakened international rule-making authority. Many developed countries and regions have developed or are preparing to develop regulatory frameworks for the classification of cryptoassets and are actively implementing them. The MiCA Act explicitly states that the EU continues to support the promotion of coordinated global governance of cryptoassets and cryptoasset services through international organizations such as the Financial Stability Board, the Basel Committee on Banking Supervision, and the Financial Action Task Force on Money Laundering. The UK's Financial Conduct Authority stated that it needs to learn from and engage with international partners and regulators to ensure that the framework it develops is closely aligned with international standards. The UK's Financial Conduct Authority plays a leading role in the International Organization of Securities Commissions' work on crypto-assets, spearheading the development and implementation of the "Policy Recommendations on Crypto-Assets and Digital Assets." It also collaborates closely with the Financial Stability Board and the Financial Action Task Force on Money Laundering, spearheading a thematic peer review of the global regulatory framework for crypto-asset activities. China has long been under strict regulation and has rarely systematically participated in international rulemaking by the International Organization of Securities Commissions, the Financial Stability Board, and the Financial Action Task Force on Money Laundering, resulting in limited contributions to the development of rules related to crypto-assets. For example, in June 2025, the Financial Action Task Force on Money Laundering published the "Travel Rule Regulatory Best Practices," providing examples of good practices that jurisdictions can consider when developing their regulatory frameworks. However, my country explicitly prohibits the use of VAs and VASPs, making it impossible to implement the Travel Rule and even more difficult to develop best practices for it. The Financial Action Task Force on Money Laundering (FATF) also pointed out the limitations of prohibitive regulation in its "Travel Rule Regulatory Best Practices," including that "stablecoin issuers are required to freeze illicit funds, but this requires regulatory collaboration across jurisdictions. Regions that have not implemented the Travel Rule (such as some prohibited countries) cannot provide a framework for cooperation," and that "differences in implementation across jurisdictions require cryptoasset service providers to individually review transactions originating from non-implementing regions (such as China), significantly increasing compliance costs and risk delays." my country's prohibitive regulation may face challenges with weak institutional adaptability and insufficient international coordination capabilities. Domestic regulatory documents are out of sync with international regulatory trends, which, in the long term, could further squeeze China's voice in this area.

IV. Shift and Improvement of China's Regulatory Strategy

(I) Rethinking the Strategic Significance of Cryptoassets

Cryptoassets hold significant strategic value in building a strong financial nation. In 2023, China's leaders proposed the "six strong" core financial elements of a strong financial nation: a strong currency, a strong central bank, strong financial institutions, a strong international financial center, strong financial supervision, and a strong financial talent pool. These elements chart the course for China's unique financial development path. Within this strategic framework, crypto assets, as a key vehicle for the fintech revolution, hold strategic value in enhancing my country's financial competitiveness. First, in promoting the internationalization of the RMB, Hong Kong's regulatory sandbox program is testing cross-border payments using stablecoins pegged to offshore RMB and other fiat currencies. This innovation allows the RMB to bypass the limitations of the traditional SWIFT system, enabling efficient "payment-as-settlement" circulation, improving the efficiency of cross-border trade settlement, and expanding its currency carrier function. Stablecoins pegged to the RMB can enhance its diverse functions as a pricing currency, payment currency, and reserve currency. Establishing an offshore RMB stablecoin system could attract countries along the Belt and Road Initiative to use it as a tool for trade settlement and reserve assets, creating a new technology-driven path for RMB internationalization and driving the RMB's development into a "strong currency." Secondly, with developed economies like the United States attempting to lead cryptoasset innovation, China's prohibitive policies may miss an opportunity to build a strong financial nation. Blockchain finance, characterized by "disintermediation," from stablecoins to real asset tokenization (RWA), represents a Web3-based financial innovation and development model. These models transcend traditional bank-led financial intermediaries, representing a paradigm shift in future finance and potentially fostering the emergence of new "powerful financial institutions." China could consider using compliant channels (such as ETFs for mainstream cryptoassets) to gradually guide private capital allocation to cryptoassets, potentially expanding its national strategic reserves and preventing lagging behind in the "digital gold" race. Legalizing cryptoasset trading will bring "underground finance" out into the open and prevent systemic risks. Some people in China have a long-standing demand for crypto asset allocation. This is due to Bitcoin's inflation-hedging properties. Its price tends to rise after rising global fiat currency inflation, similar to the anti-inflation properties of gold. Bitcoin also offers advantages such as a constant supply, portability, divisibility, and independence from specific national monetary policies. Therefore, investors view Bitcoin as a "digital gold" hedge against fiat currency devaluation. We believe that Bitcoin is "an important wealth carrier for the next generation," becoming a key unit of account for human wealth and the underlying asset of cyberspace, potentially surpassing gold in status. However, prohibitive policies have objectively led to a lack of compliant channels for domestic trading and investment in my country, resulting in capital outflows through gray channels such as offshore trading platforms and over-the-counter transactions. These underground transactions are prone to fraud, currency exchange, money laundering, and capital flight risks. The deep integration of the global cryptoasset system with the traditional financial system is becoming an unstoppable trend, independent of the will of any particular individual, institution, or country. In the long term, the limitations and negative effects of prohibitive regulation are becoming increasingly prominent. Legalizing and categorizing cryptoasset transactions for regulatory oversight will help achieve transparent domestic capital oversight, protect the rights of financial consumers, and ensure tax compliance for cryptoasset investments, thereby increasing fiscal revenue and, in practice, boosting financial regulatory capacity. my country can re-examine the economic function and strategic value of cryptoasset trading, exploring a path from a "complete ban" to a "moderate opening," bringing cryptoasset trading onto a compliant development path. Rather than allowing massive investment demand and the risks to fester underground, regulators should guide cryptoasset trading within a legal framework, while ensuring financial security. They should monitor capital flows in real time, prevent illegal financial activities, and enhance investor suitability standards. (II) Theoretical Rethinking of Prohibitive Regulatory Policies A complete ban on cryptoasset-related industries is neither realistic nor consistent with the principles of interest and proportionality. Financial regulation is a public law act involving public power interfering with private rights and should be subject to the public law principles of proportionality—legitimate purpose, appropriateness, necessity, and balance. In terms of regulatory objectives, crypto assets, represented by stablecoins, demonstrate an expansion of their legitimate purpose at the level of monetary sovereignty, making prohibitive regulation inadequate to address the corresponding challenge of currency substitution. Regarding the appropriateness and necessity of measures, regulators can employ less intrusive alternatives, such as restricting market access. However, the structural conflict between prohibitive regulation and the global development of crypto assets is becoming increasingly apparent. Regarding the principle of balance, prohibitive regulation may inhibit financial inclusion and innovation, leading to excessive interference by public authorities in private interests under the guise of public interest, making it difficult to strike a balance between infringement of private rights and the realization of public benefits. With the continued acceleration of my country's financial market opening, the interconnectedness between domestic and international financial institutions is deepening, necessitating a re-examination of established policies. Classical theory and practice of financial regulation demonstrate that safety, efficiency, and fairness are the core values that must be maintained. In determining the value objectives of financial regulation, Professor Xing Huiqiang proposed a "three-legged theorem" solution, identifying "financial security," "financial efficiency," and "consumer protection" as the three pillars of financial lawmaking, financial regulatory objectives, and financial system reform. Professor Feng Guo further refined and developed the "three-legged theorem," expanding "consumer protection" to include "financial fairness," forming a game model with checks and balances between "financial security," "financial efficiency," and "financial fairness." However, balancing these multiple policy objectives is particularly challenging in China's cryptoasset sector. Overall, risk control strategies that overly rely on administrative prohibitions stem from an excessive demand for financial security while severely neglecting financial efficiency, especially the protection of financial consumer rights, leading to a clear conflict of multiple regulatory values. Prohibitive regulation stems from a de facto belief that cryptoassets and blockchain-based decentralized finance have little practical value, leading to a large number of crimes such as money laundering, pyramid schemes, and fraud. It also recognizes that they pose significant risks to the financial system and consumer rights, while ignoring the positive functions and value of cryptoassets and their ecosystem. On a positive note, private crypto assets, such as Bitcoin, enable peer-to-peer (P2P) transactions (where the sender sends money directly to the recipient's wallet), allowing for a seamless integration of payment, settlement, and clearing. These mainstream private crypto assets offer significant advantages in streamlining intermediaries, reducing costs, improving efficiency, and fostering transparency, making them a crucial tool for hedging against the long-term devaluation of fiat currencies. Stablecoins are becoming a revolutionary mainstream cross-border payment and settlement tool. Compared to traditional financial payment systems, stablecoin cross-border payments enable instant settlement between any nodes globally. They offer advantages such as peer-to-peer, 24/7 payment processing, near-real-time transactions, and low fees and transparency. Decentralized finance is becoming a highly efficient investment and financing tool, attempting to replicate traditional financial services and business models in a decentralized manner within the crypto world. This on-chain lending model features permissionlessness, global openness, automated execution, and transparent collateralization rates. Crypto assets themselves and the associated ecosystem are not merely tools for crime; they also possess the potential for inclusive finance and promote inclusive growth. We believe that financial security, financial efficiency, and the protection of financial consumer rights are by no means contradictory; rather, they are largely unified and mutually reinforcing. Financial security that lacks efficiency, disregards costs, and stifles innovation is fragile. Financial security can only be strengthened when financial regulatory policies both promote innovation and effectively protect the rights of financial consumers. On the one hand, the United States has adopted an inclusive policy, actively embracing innovation in crypto assets, leveraging stablecoins to strengthen the dollar's international dominance, and using Bitcoin as a strategic reserve to establish the United States as the world's capital of crypto assets. On the other hand, regulatory agencies such as the U.S. Securities and Exchange Commission (SEC) have frequently targeted blockchain finance companies such as Ripple in recent years, citing the protection of financial consumer rights. Recent legislation has strengthened financial consumer protection, effectively promoting the compliance of crypto asset practitioners and safeguarding national financial security. However, under prohibitive policies, regulatory regulations and judicial decisions in the crypto asset sector often reflect a tendency to prioritize the public interest, exacerbating the dilemma of insufficient legal protection for the rights of legitimate crypto asset holders and a severe lack of judicial remedies. The current financial regulatory paradigm is undergoing a structural shift from simple regulatory constraints to innovation empowerment. The relationship between financial innovation and regulation has transcended the traditional binary opposition. The core regulatory objective is no longer simply to regulate, but to proactively align with the development trends of financial innovation and provide long-term impetus for financial innovation through financial regulation. Therefore, in advancing the regulatory system for crypto assets, in addition to the dimension of "financial security," it is important to reincorporate the long-missing value dimensions of "financial efficiency" and "consumer rights protection" into policymaking to ensure a positive interaction between these values. my country can re-examine the functional value of the crypto asset ecosystem for inclusive finance and financial development, particularly focusing on the strategic value of mainstream crypto assets in international financial and political competition, and then accurately characterize them at the legal level. In its crypto asset development strategy, my country can seek a prudent balance between promoting innovation and preventing risks, building a dynamic system based on risk assessment. Researchers have summarized three possible approaches for regulatory authorities to address crypto-asset risks: ban, contain, and regulate. With the exception of a complete ban on crypto-asset activities, these options are not mutually exclusive and can be combined. my country can continue to explore more adaptable regulatory approaches, while maintaining a firm foundation for risk prevention and control, to achieve a balance between regulation and development. In terms of regulatory strategy, my country could evolve from a "complete ban" to a "moderate opening," integrating containment and regulation strategies to bring crypto-assets under regulatory oversight, shifting from solely developing a "central bank digital currency" to a model of "coordinated development of central bank digital currency and crypto-assets." (III) Core Dimensions of Regulatory Policy Adjustments 1. Categorized Regulatory Approach China's regulatory policies have long failed to effectively differentiate between different types of crypto assets, simplistically adopting the broad definition of "virtual currency" and a blanket ban. The "Notice on Further Preventing and Addressing the Risks of Speculation in Virtual Currency Transactions" states that "virtual currencies" such as Bitcoin, Ethereum, and Tether are not legal tender because they are issued by non-monetary authorities, use encryption and distributed ledgers or similar technologies, and exist in digital form. As can be seen from the regulatory text, "virtual currency" under my country's financial regulatory framework is a complex and vast category. It encompasses "virtual coins" without any technical support and often used as tools for fraud, as well as mainstream native tokens like Bitcoin and Ethereum, and types backed by real assets like dollar-pegged stablecoins. It is untrue to consider the latter as "virtual." Different types of crypto-assets have different operating mechanisms and risk profiles, requiring regulators to treat them differently. Guided by the Financial Stability Board's principles of "same business, same risk, same regulation," "flexibility," and "technology neutrality," categorized regulation has become a global consensus on crypto-asset regulation. Developed economies adopt a categorized regulatory approach based on asset characteristics and risk levels, implementing differentiated regulation based on the economic functions and risk profiles of crypto-assets. Therefore, my country needs to identify the essential attributes of emerging businesses through functional regulation and strive to establish a policy framework for categorized regulation within existing systems. Regarding categorization models, we can draw on the functional regulatory approaches and enforcement practices of countries such as the European Union, Switzerland, and the United States, using functional regulation to determine the applicability of existing financial regulatory norms. To reduce the risk of misclassification and regulatory arbitrage, the European Union issued guidance on the classification of crypto-assets that meet the definition of securities or financial instruments. In January 2025, the U.S. Securities and Exchange Commission announced the establishment of a crypto-asset working group, led by Hester Peirce, known as "Crypto Mom." In a public statement in February 2025, Peirce stated that the crypto-asset working group would address a number of areas, including clarifying whether different types of cryptocurrencies qualify as securities; providing legal certainty for cryptocurrency projects in specific circumstances through no-action letters; exploring temporary exemptions for token issuance and streamlining the registration process; providing compliant cryptocurrency custody solutions for investment advisors and brokers; and clarifying whether crypto lending and staking fall under securities law and developing relevant rules. my country can draw on this experience to consider feasible strategies for incorporating "security tokens" into the regulatory framework, bringing greater clarity to the regulatory framework for crypto-assets while maintaining support for innovation. Securities regulators can issue separate regulations without overriding superior laws. Adhering to the functional regulatory principle of "substance over form," they can place relevant activities under the supervision of the Securities Law and flexibly apply securities legal systems to regulate them. For crypto assets that meet the criteria for categorized regulatory rules, especially mainstream crypto assets with strong global social consensus and quintessential decentralized characteristics, their property rights attributes should be affirmed. Through judicial interpretations or guiding case adjustments from the Supreme People's Court, a more rational, standardized, and legalized process for judicial identification and disposal can be established. 2. Focusing on Crypto Asset Service Providers as the Core of Regulation Globally, crypto asset trading platforms, due to their mastery of code technology and service agreements with platform users, have acquired significant power to formulate trading rules, manage trading behavior, and resolve trading disputes, becoming a key lever for public power regulation. In the digital economy, an effective information collection foundation creates favorable conditions for financial innovation and inclusive finance, and helps promote the robust operation of the entire financial system in this new technological environment. Information disclosure systems remain a core system for protecting the rights and interests of financial consumers. Regulation and oversight of cryptoasset service providers are crucial foundations for data collection, effective capital flow management, and fiscal and tax policies. International experience shows that countries regulating cryptoassets consistently prioritize cryptoasset service providers and impose compliance obligations on them. Due to previous policies of liquidation and prohibition, there are no legitimate cryptoasset service providers in my country, resulting in a lack of effective regulatory leverage. my country can systematically guide cryptoasset activities and service providers into regulatory oversight, and financial regulators can explore regulatory collaboration with issuers or centralized exchanges. Overall, developed economies such as the EU, the US, and Hong Kong generally set market access requirements for cryptoasset service providers, emphasizing customer asset protection, anti-money laundering compliance, and prevention of market manipulation, with centralized exchanges being a particular regulatory focus. For example, MiCA classifies any individual or entity providing crypto-asset services commercially as a crypto-asset service provider. These individuals and entities are required to register their offices in an EU member state and apply for authorization from the competent authorities of the member state where their registered office is located. Differentiated regulatory requirements are also applied to crypto-asset service providers with different business scopes. In light of international practice, my country's financial regulation can focus on establishing a system of rights and responsibilities for crypto-asset service providers, clarifying the responsibilities of platforms. For example, a registration and licensing system for crypto-asset exchanges, brokers, and clearing houses can be established. This will provide unified oversight of platform businesses, guiding them to develop reasonable trading rules and risk management plans within their licensed scopes, and strictly monitoring their operational practices. Regarding regulatory content, to address the money laundering and terrorist financing risks most associated with crypto-assets, international organizations, such as the Financial Action Task Force (FATF), have gradually established a regulatory framework for crypto-asset services that places obligations on crypto-asset service providers and features the "travel rule" as a key component. The European Union, the United States, Singapore, and other countries have advanced crypto-asset anti-money laundering regulation through institutional harmonization and strengthened law enforcement. They have made progress in implementing the "Travel Rule" and gradually established the foundation for a comprehensive compliance system centered on crypto-asset service providers. my country could consider adding provisions for crypto-asset service providers to the relevant implementing regulations or judicial interpretations of the Anti-Money Laundering Law, and establishing minimum entry barriers, anti-money laundering internal control requirements, reporting obligations for trading, and customer identification requirements for service types such as exchanges, custodians, smart contracts, and cross-chain bridges. Furthermore, Chinese regulators should actively address the cross-border law enforcement and jurisdictional challenges posed by the global nature of crypto-asset transactions. Leveraging the "jurisdiction by effect" principle established in Article 12 of the Anti-Money Laundering Law, my country could explore strengthening the extraterritorial application of the Anti-Money Laundering Law, regulate overseas crypto-asset service platforms that provide services to Chinese entities, and moderately expand the jurisdiction of law enforcement and judicial authorities over overseas platforms. 3. Strategic Reserves and Management of Cryptoassets As the digital economy sweeps the globe, the international monetary system is undergoing unprecedented transformation. Leveraging its first-mover advantage and technological innovation, US dollar stablecoins have become a vehicle for technological upgrading and expansion of the US dollar system in the digital age. As digital monetary instruments, stablecoins, anchored to US dollar assets and leveraging blockchain technology for rapid global circulation, are deeply embedded in cross-border payments, cryptoasset trading, and investment in emerging sectors, further consolidating the dollar's dominance in the international monetary system. Leveraging its inclusiveness and technological dominance in the cryptoasset market, the United States has included Bitcoin in its strategic reserves and established a related trading system, strengthening its dominance over this new international asset reserve system. The Stablecoin Act will further strengthen the dollar's international status. Against this backdrop, my country can respond by developing offshore RMB stablecoins and establishing a system for the reserve and management of cryptoassets. First, remove institutional barriers and promote the development of offshore RMB stablecoins. Fiat-collateralized stablecoins expand the influence of mainstream fiat currencies in the global digital space and extend the "long-arm jurisdiction" of sovereign states in the Web3 world, making them a new arena for future international monetary and financial competition. Statistics indicate that over 95% of global stablecoin issuance is currently backed by the US dollar and its assets, significantly higher than the US dollar's approximately 50% share in global payments and its approximately 58% share in global official foreign exchange reserves. It can be said that the stablecoins currently in widespread circulation are essentially digital dollar tokens, solidifying the US dollar's central position in cross-border payments and cryptoasset trading. In response to these issues, economists emphasize the need to explore RMB stablecoins to enhance the RMB's position in the global financial landscape and offset the impact of the US dollar-dominated digital financial system. However, the issuance and use of RMB stablecoins within China face legal challenges from an institutional perspective. The "Notice on Further Preventing and Addressing the Risks of Speculation in Virtual Currency Transactions" explicitly defines virtual currency transactions (including stablecoins) as illegal financial activities and prohibits any institution from providing related services. It also includes illegal services provided by overseas exchanges to domestic residents. Therefore, my country will need to adjust these regulations in the future to remove institutional barriers to the "legality" of the issuance and use of RMB stablecoins both domestically and internationally. On this basis, by issuing offshore RMB-backed stablecoins, my country can attract more market-oriented institutions to use them for cross-border payments and within the business ecosystem, thereby enhancing the RMB's international status. Second, allow for pilot programs under supervision. Hong Kong, as the world's largest offshore RMB business hub, possesses the institutional environment and market foundation for pilot programs of RMB-pegged stablecoins. As an international financial center, Hong Kong possesses unique advantages in developing offshore RMB stablecoins. From a financial infrastructure perspective, Hong Kong possesses a mature legal system, an advanced financial regulatory framework, and a rich pool of financial talent. Leveraging Hong Kong's status as a financial center and its existing institutional foundation, my country can develop offshore RMB stablecoins and actively participate in the stablecoin market. Furthermore, the Hong Kong Monetary Authority and the Securities and Futures Commission (SFC) are promoting the implementation of more supportive policies to foster a friendly atmosphere for cryptocurrency innovation and investment, attracting more companies and investors and enhancing Hong Kong's influence in the global cryptocurrency market. The central government encourages and supports Hong Kong's development in cryptoasset investment, trading, and Web 3.0 technology innovation, establishing Hong Kong as a prime testing ground for cryptoasset trading and the development of RMB stablecoins. The central government will fully summarize Hong Kong's legislative and practical experience to provide valuable reference for the future moderate opening of mainland China's digital financial market. Following the legalization of mainstream cryptoasset trading in Hong Kong, mainland judicial authorities have been liquidating seized cryptoassets through licensed Hong Kong exchanges. Under current mainland regulatory policies, the legality of this liquidation method remains highly controversial. If mainland China maintains a long-term prohibitive policy, the divergent regulations between the two jurisdictions regarding the same financial industry will lead to numerous practical legal issues and disputes. These issues could lead to significant disagreements between the two courts regarding the legal nature of cryptoassets, the protection of holders' rights, and property inheritance, potentially inducing capital outflows from mainland China through cryptoassets. A degree of policy coordination is urgently needed. Third, explore the system for cryptoasset reserves and management. Bitcoin, as a mainstream cryptoasset, is increasingly recognized as "digital gold" due to its scarcity and security. Countries that first establish strategic Bitcoin reserves will gain a strategic first-mover advantage. Globally, cryptoassets, represented by Bitcoin, are gradually shedding their early labels as "money laundering tools" and "speculation tools," and their emerging asset class attributes are increasingly gaining mainstream market recognition. Bitcoin is gradually shifting from a "speculative asset" to a "strategic reserve asset," and its position in the global asset reserve system deserves my country's close attention. Based on its Bitcoin strategic reserve, the United States may further enhance its dominance over new international asset reserves, and China needs to make substantial preparations in this regard. According to incomplete statistics, China has confiscated over 200,000 Bitcoins through judicial means. However, due to regulatory regulations that negatively assess cryptoassets as "illegal financial activities," these assets have long faced legal challenges and institutional barriers to disposal and liquidation. It is necessary to accelerate consensus on recognizing the legal attributes of mainstream cryptoassets, establishing unified disposal procedures, and regulating the disposal of cryptoassets. my country could also gradually relax restrictions on eligible mainland Chinese investors from participating in cryptoasset trading in Hong Kong (such as Bitcoin ETFs), thereby partially realizing a "private strategic Bitcoin reserve" without requiring significant policy adjustments. Furthermore, my country could follow the US model of establishing a "strategic Bitcoin reserve," incorporating it into its foreign exchange management framework to hedge against the risk of devaluation of US dollar assets, thereby enhancing its control over cryptoassets and leveraging its leverage in global financial competition. From a management perspective, unified and centralized management by the central government is more appropriate. Centralized management not only avoids the fragmented and arbitrary nature of local management and the potential for profiteering, but also leverages national resources and expertise to achieve effective management and value preservation and appreciation of cryptoassets through scientific and rational asset allocation and market operations. V. Conclusion The cryptoasset sector has become a new arena in the future of international financial competition, playing a vital role in promoting innovation and economic development, and enhancing China's international leadership. The integration of the cryptoasset ecosystem with the traditional financial system is a major trend. Global cryptoasset regulation is shifting from allowing it to "grow wildly" in the past to a current "rule reconstruction." In response, China, while upholding the bottom line of financial security, should adjust prohibitive regulations in a timely manner and prioritize the protection of the rights and interests of legitimate cryptoasset holders to avoid missing out on the revolutionary opportunities presented by new financial sectors due to lagging policies. In the short term, my country could encourage the Hong Kong SAR government to further deepen, strengthen, and thoroughly implement cryptoasset trading, investment, and financial innovation, assess risks, and identify replicable experiences, thereby exploring the possibility of moderately liberalizing cryptoasset trading and financial innovation on the mainland. In the medium to long term, my country could consider adjusting its blanket prohibition, balancing financial security, efficiency, and consumer protection. It could also implement categorized regulation for cryptoassets, cultivate and guide compliant domestic cryptoasset service providers, and incorporate mainstream cryptoasset reserves into its new economic development strategy. In short, at this critical juncture in building a strong financial nation, cryptoassets are a strategic pillar for reshaping currency competitiveness and upgrading financial markets. A "strong international financial center" must include the ability to price cryptoassets against fiat currencies, and a "strong currency" must encompass crypto technology. China's development of crypto assets can be based on the core connotation of "financial power", moving towards a new era of inclusive and prudent regulation in the field of crypto assets. It can use encryption technology to empower the internationalization of sovereign currencies, use regulatory innovation to prevent potential risks of crypto assets, and enhance the competitiveness of financial markets through appropriate opening of phased systems. It can also enhance China's voice in the formulation of rules in the field of crypto assets, occupy the commanding heights in the new round of global digital financial competition, and achieve the leap from a financial power to a financial power.

Source: Journal of Shandong University (Philosophy and Social Sciences Edition)