Why Crypto Card Issuers Face Illegal Business Charges in China
As crypto payments heat up, exchanges, wallet providers, card infrastructure platforms, and even DeFi protocols are launching crypto-backed cards (U卡/VCC virtual credit cards). But Chinese prosecutors have been scrutinizing these projects for years. A lawyer’s team has handled multiple illegal business operation cases against card issuers, including two recent VCC operator cases.
The Legal Minefield
China’s strict financial regulations classify unauthorized payment settlement and fund clearing as illegal business operations. Crypto card platforms often sit at the intersection of multiple regulated activities: cross-border payments, foreign exchange, and payment processing. When these platforms facilitate crypto-to-fiat conversions or act as intermediaries without licenses, they risk running afoul of Article 225 of China’s Criminal Law.
The core issue is whether the platform is effectively conducting payment business without a license. Even if the crypto card is issued offshore, the operator’s activities within China—marketing, customer service, fund collection—can trigger jurisdiction. The five criminal risk points likely include: unlicensed payment settlement, illegal foreign exchange transactions, money laundering facilitation, unauthorized fund pooling, and evasion of financial supervision.
Industry Implications
This regulatory scrutiny creates significant uncertainty for crypto payment startups targeting Chinese users. Projects must carefully structure their operations to avoid touching regulated activities. The line between legitimate crypto card issuance and illegal payment business is not always clear, making compliance a moving target.
Forward-Looking Perspective
As crypto payments grow, regulators worldwide are tightening oversight. In China, the legal risks are particularly acute given the blanket ban on crypto trading. Projects should seek legal counsel early and consider geo-fencing Chinese users. The recent cases signal that prosecutors are actively building expertise in this area, and more enforcement actions are likely. For now, the safest path is to avoid any activity that could be construed as unlicensed payment processing or currency exchange.
