In virtual currency activities, how to safely 'withdraw funds' remains a timeless topic. U-cards seem to provide a convenient way to consume without the need to withdraw funds (it can also be considered that using a U-card is the safest way to withdraw funds), hence it is favored by people in the cryptocurrency community.

Many people have thus started the business of promoting U-cards. I often see advertisements for card-opening discounts in communities and platforms, and frequently on mainland video platforms, there are contents that seem to popularize U-card knowledge, but in fact, they lead you to add private messages to purchase card opening services. Whether these promoters only collect commissions from issuers or earn service fees from cardholders is unknown.

However, Lawyer Mankun hopes to remind about the risks of U-card promotion through this article, especially the legal risks of promoting U-cards to mainland users.

What is a U-card?

U-card refers to USDT bank cards, and its core logic is to utilize the price stability of USDT (which is generally pegged to the US dollar) to provide users with a stable and convenient payment method. A specific scenario could be, for example, ordering a coffee at a coffee shop, where our WeChat payment is linked to a bank card, which can complete the transaction. If you hold a U-card, which is linked to a payment app, you can recharge USDT into the card and use it for consumption in various physical scenarios offline.

Because USDT, as a stablecoin, is different from cryptocurrencies like BTC or ETH, which have significant price volatility, this makes it more feasible for daily payments. Especially now, with stablecoin legislation being passed in various regions, it is possible that more stablecoin bank cards will emerge, with U-cards being one such example.

Currently promoting U-cards to users in mainland China carries policy risks.

Currently, we find that some U-card promoters have not been assigned by the project party (i.e., there is no project party paying for the promotional activities or commissions), but individuals have taken on the card opening needs of mainland residents, even in bulk. The risks involved are multi-faceted:

First, based on previous announcements and notices from the People's Bank of China and other units (such as the "924 Announcement"), as well as current judicial rulings within mainland China, it is evident that the mainland has clearly expressed a negative attitude toward the exchange of cryptocurrencies with fiat currencies. The process of using U-cards for virtual currency transactions can easily violate the 'red line' of our foreign exchange management system. Once the authorities determine that the promoter is knowingly aware of and condoning foreign exchange trading, the promoter could be considered an accomplice to the crime of 'illegal operation'. Therefore, promoting U-cards to residents within mainland China should not use fiat currency exchange as a gimmick.

Secondly, as a U-card promoter, one should also pay attention to the review of the issuing institution. This is similar to KOL (Key Opinion Leader) bringing in projects, requiring scrutiny of the project's legality.

Currently, U-card issuers generally include the following four types:

1. Direct issuance by banks. Banks themselves are willing to accept stablecoins and use their payment networks and compliance frameworks to provide users with stable cryptocurrency payment solutions.

2. Cooperation between banks and cryptocurrency companies for issuance. In this case, banks provide traditional financial infrastructure, while third-party companies are responsible for the management and conversion of cryptocurrencies.

3. Independent issuance by professional cryptocurrency payment companies. Some companies focused on cryptocurrency payments independently issue U-cards through partnerships with payment networks like Visa or MasterCard.

4. SaaS model cooperative issuance. This refers to some third-party payment companies providing a U-card issuance platform for channel providers or other financial service providers through a SaaS (Software as a Service) model.

As a promoter, it is crucial to choose a well-known U-card provider to ensure the safety of funds. Promoters should avoid promoting niche or even unlicensed service providers. Even if these companies are not involved in scams, their inability to provide sufficient financial guarantees and trading safety measures could lead to financial losses, which could lead to being investigated for fraud as a promoter targeting mainland users.

Finally and more importantly, U-card promoters cannot assume that 'as long as they do not directly use the U-card and only promote or facilitate card applications, they do not constitute a crime.'

From a light perspective, on one hand, some U-card issuers do not intend to market to residents of mainland China; promoters collect information from mainland Chinese users and assist with other visa materials to help open cards, which may violate the risks of fraudulently obtaining credit documents in foreign jurisdictions. On the other hand, since U-card promoters have started collecting information from mainland residents to open cards, they inevitably need to bear the issue of personal information protection. If personal information leakage reaches a certain quantity, it may be considered a crime.

From a serious perspective, U-card promoters taking on the responsibility of opening cards effectively assume the issuer's review obligations. For example, if a cardholder provides false identity information to open a card, and the U-card promoter assists in completing the card opening, once money laundering activities occur, based on the investigative habits in mainland China, it will be presumed that the person assisting in the card opening was aware of the criminal intent. For instance, if a mainland resident needs to open multiple cards at once, it evidently indicates an intention to bypass foreign exchange limits or other abnormal usage intentions. Assisting in this card opening would also involve associated crimes.

Summary

U-cards and other stablecoin bank cards, as a convenient method of cryptocurrency payment, are believed to become a way of life in the future. However, currently, as promoters, it is essential to carefully select issuers and understand relevant legal and compliance requirements as a basic requirement.

Currently, Lawyer Mankun strongly advises against promoting U-cards to users in mainland China due to policy risks. Even if in the future, the legal and regulatory framework for cryptocurrencies within mainland China becomes more relaxed and flexible, stablecoin card promoters should not participate in assisting with the card-opening process, to avoid assuming the review responsibilities that should be borne by the issuer.

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Author of this article: Lawyer Deng Xiaoyu