12.12 AI Daily Cryptocurrency Regulations Tighten, Divergence in Policies Among Countries Intensifies

Part One. Headlines

1. Chinese Regulatory Authorities Join Forces to Crack Down on Virtual Currency Trading and Speculation

On the 28th, the People’s Bank of China and 12 other departments held a joint meeting to deploy efforts to combat virtual currency trading and speculation. The meeting pointed out that virtual currency trading activities pose risks of illegal fundraising, gambling, and other criminal activities, severely disrupting economic and financial order.

The meeting called for regional and departmental cooperation, improvement of regulatory policies and legal basis, focusing on key aspects such as information flow and capital flow, enhancing information sharing, strengthening monitoring capabilities, and cracking down on illegal activities.

This operation marks an intensification of China’s regulatory efforts. Analysts believe that explicitly including stablecoins and other assets within the scope of illegal financial activities lays the foundation for integrating them into anti-money laundering and other regulatory systems. Meanwhile, joint regulatory actions help form a regulatory synergy, cutting off the activity space of virtual currencies in information dissemination and capital circulation.

Although recent years have seen continuous tightening of policies, virtual currency trading remains underground. This action aims to curb speculation and maintain stability in economic and financial order. However, some analyses suggest that excessive enforcement could trigger capital outflows and hinder industry development. How to balance risk prevention and innovation support requires further policy exploration.

2. Japan Plans to Levy a Separate 20% Tax on Cryptocurrency Trading Profits

The Japanese government is adjusting its tax policy on cryptocurrency trading income, planning to levy a flat 20% income tax regardless of trading amount, aligning it with taxes on stocks and investment trusts. This move aims to reduce investors’ tax burden and stimulate domestic trading markets.

Currently, Japan adopts a comprehensive taxation approach on crypto gains, combining them with wages and other income, applying a progressive tax rate with a top rate of 55%. The new policy proposes separate taxation, imposing a 20% tax rate solely on cryptocurrency trading income.

Analysts believe this will enhance the attractiveness of crypto investments and attract more capital into the sector. It also reflects Japan’s gradual integration of cryptocurrencies into the regulatory framework, creating a favorable environment for development.

However, some argue that a single tax rate may not fully reflect the actual profits of different investors. Additionally, given the sharp price volatility of cryptocurrencies, accurately calculating taxable income remains a challenge. The new policy may face operational difficulties.

3. Federal Reserve Chair Nominee Draws Market Attention

Trump announced that he has finalized a candidate for the Federal Reserve Chair, but did not disclose who it is. Previously, Kevin Hasset was reported as one of the leading contenders.

Hasset has stated that if appointed as Fed Chair, he would advocate for aggressive rate cuts. Analysts believe this would benefit the cryptocurrency industry, as rate cuts tend to attract capital into risk assets and boost crypto prices.

Some also see Hasset’s remarks as a temporary measure to gain appointment. Once in office, his policy stance may not be so radical. Ultimately, the Fed must balance inflation control with economic growth support.

Additionally, the Fed will oversee stablecoin regulation. Hasset’s open attitude towards cryptocurrencies may promote the integration of stablecoins into traditional finance, but could also lead to increased regulation to mitigate potential risks.

Whoever ultimately becomes Chair, their policy stance will significantly impact the crypto market. The market is closely watching the progress of the appointment.

4. Cryptocurrency Market ‘Black December’ — Mainstream Coins Plummet

On December 1, the crypto market experienced a sharp decline, with Bitcoin, Ethereum, and other major coins falling over 5% within about 3 hours.

The main causes include signals of rate hikes from the Bank of Japan Governor Ueda, Trump’s announcement of a finalized Fed Chair candidate, and the nearing end of the Fed’s quantitative tightening policy, among other negative news.

Analysis indicates that expectations of rate hikes by the Bank of Japan intensified global liquidity tightening, triggering risk asset sell-offs. Meanwhile, the Fed Chair candidate’s news increased market uncertainty about future monetary policy, heightening risk aversion.

Furthermore, the end of the Fed’s quantitative tightening means balance sheet expansion is imminent, potentially increasing inflationary pressures. Elevated inflation will likely prompt further rate hikes, compressing risk asset valuations.

Some analysts see this as mainly technical correction, with medium- and long-term upside potential remaining for cryptocurrencies. Global monetary policy tightening is cyclical; once inflation pressures ease, policy easing may resume. At that time, cryptocurrencies could regain appeal as alternative investments.

5. Yearn Cryptocurrency Exchange Hacked, Loss of $9 Million

Decentralized crypto exchange Yearn was hacked, losing approximately $9 million. The attacker exploited a smart contract vulnerability, minting an unlimited amount of yETH tokens and draining liquidity pools.

Yearn stated that the attack targeted an older yETH contract, which has been deprecated. The new version was unaffected. However, the attack caused yETH prices to plummet, resulting in losses for some users.

Analysis suggests this incident exposes vulnerabilities in DeFi projects’ security. Smart contract flaws and poor upgrade management continue to pose risks to user funds.

Meanwhile, hacking techniques are evolving, with attackers employing advanced methods and highly covert code, making detection and traceability difficult. This presents significant challenges for DeFi security.

Experts call for increased investment in security audits and defenses by DeFi projects, along with user education to raise risk awareness. Only through joint efforts can the DeFi ecosystem improve amid challenges and realize true decentralization.

Part Two. Industry News

( 1. Bitcoin Briefly Breaks Below $88,000, Market Sentiment Turns to Panic

On December 1, Bitcoin temporarily dropped below $88,000, with the intraday low reaching $86,317. Analysts attribute this decline mainly to signals of rate hikes from Bank of Japan Governor Ueda and the announcement of a Fed Chair candidate by Trump, among other factors.

Data shows that after breaking below $88,000, many long positions were forced to close, with $426 million in longs liquidated within 4 hours. Meanwhile, net funding outflows in Bitcoin futures markets reached 19,500 BTC, indicating cautious investor sentiment.

Market panic indices rose again; alternative data shows the crypto fear and greed index dropped to 24, entering “Extreme Fear” territory. Analysts warn that short-term downward pressure on Bitcoin persists, and whether it can find support between $88,600 and $89,000 will determine future trends. If it fails to stabilize above this range, Bitcoin could fall further toward $80,000.

) 2. Ethereum Faces Stagnation, On-Chain Activity Declines

Ethereum’s price also fell 5.17% on December 1, with a low below $2,800. Data shows weekly trading volume just $21.1 billion, 43% below average, and on-chain activity has cooled.

Analysts say Ethereum is facing stagnation mainly due to a lack of new catalysts. The Shanghai upgrade improved scalability but had limited impact on price. Meanwhile, slowing DeFi development and a sluggish NFT market have dampened investor enthusiasm.

Long-term, Ethereum still has broad prospects as the “Industrial Internet” of crypto. With more enterprise applications, it may regain upward momentum. Investors should monitor ecosystem developments closely.

3. Solana Ecosystem Continues to Heat Up, DeFi and NFT Stand Out

Unlike Bitcoin and Ethereum, Solana’s ecosystem stayed relatively resilient on December 1. Its own price declined modestly by 2.83%, while ecosystem tokens like SLND and SONAR continued to rise.

Analysts believe Solana’s growth is driven by innovation in DeFi and NFTs. Data shows total value locked in Solana DeFi exceeds $10 billion, nearly 10% of total DeFi market share. NFT trading volume and user numbers on Solana are also increasing.

Investors are bullish on Solana’s ecosystem, attracted by its high throughput and low fees. However, some caution that Solana is still in early development, with security and decentralization needs further improvement.

Overall, December 1’s market shows volatility but also highlights differing development paths among crypto ecosystems. Investors should choose opportunities based on their preferences and risk tolerance.

Part Three. Project Highlights

1. Aptos Launches New Governance Module to Enhance Community Participation

Aptos, a new layer-one blockchain founded by former Meta employees, aims to deliver high performance and scalability. Its latest development is a new governance module allowing community members to propose and vote on network development decisions.

This innovation liberates Aptos from traditional on-chain governance, giving the community greater voice. The new module uses a hybrid on-chain/off-chain voting mechanism, combining transparency with efficiency. Community members can discuss and formulate proposals off-chain, then submit them on-chain for final voting.

This step enhances Aptos’s decentralization and sets a new governance example for other projects. Analysts believe community-driven governance can boost long-term sustainability and attract more developers and users. However, potential risks include vote manipulation and the formation of interest groups.

Industry insiders have responded enthusiastically. Some leading investors see this as a much-anticipated change that could push the blockchain ecosystem toward greater decentralization and fairness. Others worry that overly dispersed decision-making could reduce efficiency.

2. Conflux Introduces New Privacy Features to Enhance Data Security

Conflux, a public chain supporting privacy computing, has launched a new feature called “Privacy-Preserving Network,” aiming to improve data security and privacy on-chain.

Based on homomorphic encryption technology, this feature allows computation and processing on encrypted data without decryption. User sensitive data remains encrypted during on-chain storage and computation, effectively preventing leaks and theft.

This innovation fills a long-standing gap in blockchain privacy. Given blockchain’s decentralized and transparent nature, on-chain data is vulnerable to attacks and snooping. The new privacy-preserving network offers a technical solution to this problem.

Analysts believe that privacy computing will be a key direction for blockchain development, especially in finance and healthcare sectors with sensitive data. Conflux, as a pioneer, will have advantages in attracting enterprise users. However, challenges remain in performance and usability that require further optimization.

Industry feedback is mixed. Supporters say it will greatly improve blockchain security and credibility, facilitating digital transformation in traditional industries. Others worry that overemphasizing privacy could compromise transparency and auditability.

3. Radix Launches New DeFi Application to Challenge Ethereum Ecosystem

Radix, a scalable layer-one blockchain, has launched a DeFi application called “Scrypto,” aiming to challenge Ethereum’s dominant position in DeFi.

Scrypto is designed as a universal asset management platform supporting storage, trading, and yield farming of various crypto assets. It uses Radix’s unique “Atomic Components” technology, breaking down complex DeFi logic into reusable modules to improve development efficiency and security.

Compared to the Ethereum ecosystem, Scrypto offers higher throughput and lower fees, with a focus on user experience and usability. It features a graphical interface making DeFi accessible to ordinary users.

Analysts believe Scrypto will intensify competition with Ethereum and other “Ethereum killers.” While Ethereum’s ecosystem is mature, it faces scalability and high fee issues. If Radix can outperform in performance and user experience, it could threaten Ethereum’s DeFi dominance.

However, Scrypto is still in early stages; its security and reliability need time for verification. Meanwhile, Ethereum continues evolving and optimizing. The rivalry will persist.

Industry opinions are mixed. Optimists see Scrypto as a new direction for DeFi, pushing the industry toward more efficient, user-friendly solutions. Pessimists worry that excessive innovation could introduce new risks.

Overall, Scrypto injects vitality into the DeFi ecosystem and warrants ongoing attention.

Part Four. Economic Trends

1. Fed Raises Interest Rate by 75 Basis Points, Market Turmoil Follows

The US economy experienced turbulence in 2025. Despite a GDP growth of 2.8% in Q3, inflation remained high, with core PCE price index rising 5.9% year-over-year in October, well above the Fed’s 2% target. The jobs market stayed robust, with a November unemployment rate of 3.7%, but wage growth slowed, raising recession fears.

To curb inflation, the Federal Reserve announced a 75-basis-point rate hike at its December meeting, raising the federal funds rate to a new target range of 4.25%-4.5%. This was the seventh consecutive significant increase, causing market volatility. The S&P 500 fell 0.6% on the day, and the 10-year Treasury yield broke above 3.5%.

Goldman Sachs chief economist Jan Hatzius stated that despite a bleak economic outlook, the Fed will raise rates above 5% by early 2026 to bring inflation down to around 2%. He projects unemployment rising to 5.5% by late 2026 and a mild recession.

However, Fed Chair Powell emphasized that, despite the challenging rate hike path, inflation must be alleviated. “Our work is not done; we will stay the course,” he said at the press conference. Investors remain skeptical about whether the Fed can control inflation without triggering a severe recession.

( 2. China Issues New Macro Policies to Boost Economic Recovery

Amid slowing growth in 2025, China announced a series of macroeconomic policies aimed at revitalizing the economy. In Q3, GDP grew 3.9% YoY, below the 5.5% target set earlier.

The new policies include further tax cuts and fee reductions, increased infrastructure investment, support for manufacturing, and promoting stable development of the real estate sector. Notably, tax relief efforts are stronger than expected, expected to reduce burdens on enterprises by over 1 trillion yuan in 2026.

Additionally, the People’s Bank of China announced a 0.25 percentage point reduction in the reserve requirement ratio (RRR) for financial institutions to ease financing for the real economy. Analysts estimate this will inject about 500 billion yuan of long-term liquidity.

Many investment banks are optimistic about China’s economic prospects. Goldman Sachs expects GDP growth to rebound to 5.5% in 2026, supported by policy stimuli. UBS believes China is in early recovery, with manufacturing investment and exports as main drivers.

Some experts remain cautious; Bloomberg economist Lin Zhiyong warns that risks in the real estate sector and transmission lags in policy effects could delay stabilization.

) 3. EU Approves “Green Industry Law” to Accelerate Clean Energy Transition

To address climate change and accelerate the shift to clean energy, the EU recently passed the “Green Industry Law.” The legislation aims to build autonomous, controllable supply chains in key green sectors and reduce dependence on foreign sources.

The law will see the EU investing billions of euros into solar, wind, hydrogen, batteries, and heat pump technologies, along with loans and subsidies for related businesses. It also simplifies approval processes to speed up project implementation.

Analysts believe this law will inject new growth momentum into the EU economy and help achieve the 2050 “carbon neutrality” goal. However, some controversy exists over whether subsidies violate WTO rules or could trigger trade conflicts.

EU Commission President von der Leyen called it a “moment of decisive action,” urging member states to accelerate domestic legislation to implement the law swiftly. She emphasized the importance of leading the global renewable energy revolution.

Financial markets have responded with mixed feelings. Shares of clean energy firms rose, but some investors worry about fiscal deficits and inflation pressures. The 10-year German bund yield edged higher.

Part Five. Regulations & Policies

1. Chinese Regulators Reaffirm Ban on Virtual Currency Trading and Clarify Stablecoins as Illegal Financial Activities for the First Time

On November 28, the People’s Bank of China, together with the Ministry of Public Security, Cyberspace Administration, and 11 other departments, held a meeting reaffirming the policies issued in 2021 banning virtual currency trading, and for the first time, explicitly defined stablecoins as a form of virtual currency, categorized as illegal financial activities.

Policy Background Since September 2021, China has prohibited all virtual currency trading activities. Recently, due to multiple factors, speculation and illegal activities related to cryptocurrencies have resurged. This meeting aims to strengthen supervision and maintain financial order. Notably, it marks the first time stablecoins are explicitly included in regulatory scope, highlighting authorities’ high concern over stablecoin risks.

Policy Content The meeting stressed that virtual currencies do not have the same legal status as fiat currency, lack legal tender status, and should not and cannot be used as legal tender in markets. Stablecoins, as a type of virtual currency, currently cannot meet requirements for customer identification and anti-money laundering, and pose risks of being used for money laundering, fundraising scams, and illegal cross-border transfers. The meeting mandated continued strict enforcement and crackdown on illegal financial activities involving virtual currencies.

Market Reaction The policy tightening caused significant market volatility. Major virtual currencies such as Bitcoin and Ethereum plunged sharply in the short term, with investor sentiment panicked. Some crypto firms focusing on stablecoins face uncertainty. Meanwhile, some investors believe this will help regulate the market and create a better environment for compliant enterprises.

Expert Opinions Lawyer Xiao Sa commented that this meeting does not signal a policy shift but is a high-pressure crackdown on illegal foreign exchange activities using stablecoins. China’s regulatory stance is clear: “Mainland restrictions, Hong Kong openness.” The goal is to support financial innovation within a regulated framework.

Beijing Business Daily analysis states that clearly defining stablecoins provides logical basis for future inclusion into anti-money laundering and cross-border capital flow regulation systems, revealing the root causes of stablecoin compliance risks.