In virtual currency activities, how to safely 'withdraw funds' is an enduring topic. U-cards seem to provide a convenient way to consume without the need to withdraw funds (which can also be seen as using U-cards being the safest way to withdraw), thus they are popular among cryptocurrency enthusiasts.
Many people have started the business of promoting U-cards. I often see advertisements for card issuance discounts in communities and platforms, and frequently on mainland video platforms, content is presented under the guise of popularizing U-card knowledge, which in fact encourages you to add private messages to purchase card issuance services. It is unclear whether these promoters are merely receiving commissions from the issuer or earning service fees from cardholders.
Through this article, I hope to highlight the risks of U-card promotion, especially the legal risks of promoting U-cards to users in mainland China.
What is a U-card?
U-cards are USDT bank cards, and their core logic is to utilize the price stability of USDT (which is usually pegged to the US dollar) to provide users with a stable and convenient payment method. For example, when ordering a cup of coffee at a café, if our WeChat payment is linked to a bank card, we can complete the transaction. If you hold a U-card that is linked to a payment app and recharge USDT into the card, you can spend it in various physical scenarios.
Because USDT, as a stablecoin, is different from cryptocurrencies like BTC or ETH, which have high volatility, this makes it more feasible for daily payments. Especially with various stablecoin bills being passed in different regions, it is likely that more stablecoin bank cards will emerge in the future, and the U-card is one type of stablecoin bank card.
Currently, promoting U-cards to users in mainland China carries policy risks.
Currently, we find that some U-card promoters have not been appointed by the project party (i.e., no project party pays for the promotion activity), but are individuals seeking to earn card issuance service fees by taking on the card issuance needs of mainland residents, even in bulk. The risks involved are multifaceted.
Firstly, based on past announcements and notifications from institutions like the People's Bank of China (e.g., the '924 Announcement'), as well as current judicial decisions in mainland China, it is clear that the mainland has expressed a negative stance on the exchange of cryptocurrencies with fiat currencies. The process of using U-cards for virtual currency transactions easily touches the 'red line' of China's foreign exchange management regulations. Once the authorities determine that the promoter subjectively knows about, condones, or indirectly supports foreign exchange trading, the promoter may be deemed an accomplice to 'illegal business operations.' Therefore, promoting U-cards to residents within mainland China cannot be presented as an opportunity to exchange for fiat currency.
Secondly, as U-card promoters, they should also pay attention to the review of the issuing institutions. This is similar to how KOLs need to review the legality of the project they are promoting.
Currently, U-card issuers generally include the following four types:
1. Direct issuance by banks. Banks are willing to accept stablecoins and provide users with stable cryptocurrency payment solutions using their own payment networks and compliance frameworks.
2. Issuance in collaboration between banks and cryptocurrency companies. In this case, banks provide traditional financial infrastructure, while third-party companies are responsible for managing and converting cryptocurrencies.
3. Independently issued by specialized cryptocurrency payment companies. Some companies focused on cryptocurrency payments collaborate with payment networks like Visa or MasterCard to independently issue U-cards.
4. Collaboration for issuance under a SaaS model. This refers to some third-party payment companies providing U-card issuance platforms to channel partners or other financial service providers through a SaaS (Software as a Service) model.
Therefore, as promoters, it is very important to choose well-known U-card providers to ensure fund safety. Promoters should avoid promoting niche or unlicensed service providers, as these companies, even if they are not Ponzi schemes, may not provide sufficient fund guarantees and transaction security measures, leading to property losses. As promoters targeting mainland users, they could easily be charged with fraud.
Finally, and more importantly, U-card promoters cannot assume that 'as long as they do not directly use U-cards and merely promote or handle card applications, they do not constitute a crime.'
On a lighter note, on one hand, some U-card issuers do not intend to serve mainland residents, and promoters collecting information from users in mainland China to assist with card issuance using other visa materials may violate the risk of fraudulently obtaining credit certificates in foreign jurisdictions. On the other hand, since U-card promoters have started collecting information from mainland residents for card issuance, they inevitably need to bear the issue of personal information protection, and if the leakage of personal information reaches a certain amount, it may be considered a crime.
From a more serious perspective, U-card promoters taking on card issuance is effectively assuming the review obligations of the issuer. For example, if a cardholder provides false identity information to apply for a card, and the U-card promoter assists in the issuance, once money laundering activities occur, based on the investigative practices in mainland China, it will be presumed that the assisting personnel knew of the criminal intent. Another example is if a mainland resident needs to issue multiple cards at once, which clearly indicates an intention to bypass foreign exchange limits or other abnormal usage intentions, the U-card promoter assisting in card issuance will also be involved in related crimes.
Conclusion
U-cards and other stablecoin bank cards, as a convenient cryptocurrency payment method, are believed to become a lifestyle in the future. However, at present, as promoters, it is essential to carefully choose issuers and understand relevant legal and compliance requirements.
At present, we strongly advise against promoting U-cards to users in mainland China due to policy risks. Even in the future, if the legal and regulatory framework for cryptocurrencies in mainland China becomes more relaxed and flexible, stablecoin card promoters should not participate in assisting with card issuance to avoid taking on the review responsibilities that should be borne by the issuer.
Author of this article: Liu Honglin