Legal Challenges Faced by Virtual Credit Cards in China

In recent years, with the rapid development of digital payments, virtual credit cards have become an important tool in cross-border payment scenarios such as online shopping and service subscriptions. However, this emerging payment method faces a series of legal and regulatory challenges in China.

The Development History of Virtual Credit Cards

Virtual credit cards are not a new phenomenon in China. As early as around 2013, some pioneers began trying to promote them, but they quickly encountered obstacles due to policy restrictions. In recent years, with the development of blockchain technology, cross-border e-commerce, and artificial intelligence, virtual credit cards have entered a period of rapid growth, becoming a new payment tool for an increasing number of users.

Main Use Cases

Although called a "credit card", a virtual credit card actually requires preloading before it can be used. Its main application scenarios include:

• Cross-border shopping: Applicable to international e-commerce platforms
• Subscription services and digital content purchases
• Online booking services, such as car rentals, hotels, etc.
• Online advertising and marketing payments
• Forex trading and cryptocurrency payments

Legal Risk Analysis

Although many virtual credit card platforms are registered overseas and have obtained relevant qualifications, they may still face legal risks if they operate in mainland China. This mainly involves two aspects:

1. "Illegal operation crime of payment and settlement" : Engaging in payment and settlement business without obtaining payment business license.

2. "Illegal operation of foreign exchange trading" crime: Engaging in foreign exchange buying, selling, exchanging, and trading activities without obtaining the relevant foreign exchange management or financial business licenses.

Regulatory Concerns

The main concerns of regulatory authorities regarding virtual credit card services include:

• User Rights Protection: How to Respond to the Risk of Identity Information Theft
• Difficulty in executing anti-money laundering tasks: The simplified application process may be exploited by criminals.
• KYC Certification: Some platforms promote that no KYC certification is required, which is contrary to regulatory principles.

Risk Prevention Recommendations

Although virtual credit cards have great potential as an innovative payment tool, service providers may face legal risks when operating in mainland China. It is recommended to take the following measures:

• Focus the operational emphasis on overseas.
• Implement strict compliance measures, such as improving KYC, KYB, and KYT anti-money laundering procedures.
• Improve User Service Agreement
• Set reasonable recharge and usage conditions
• Ensure compliance with the laws and regulations of the country and region where you are located.

The development of the virtual credit card industry needs to find a balance between innovation and compliance. Service providers should closely monitor regulatory trends and continuously improve their compliance systems to achieve sustainable development in a highly competitive market.