Chinese regulations on cryptocurrency

In June , trading cryptocurrency was officially banned in China, when the PBOC stated they would be blocking access to all forms of cryptocurrency exchanges, domestic and foreign, and Initial Coin Offering websites although cryptocurrency transactions continued through foreign online exchanges.

Three industry bodies the China Banking Association and the Payment, the Clearing Association of China, and the National Internet Finance Association of China released a statement categorically informing that offering services such as registration, clearing, settlement, and trading is not permissible.

Government officials attempted to increase pressure on the industry by warning buyers they will not receive protection for trading in bitcoin and other online currencies. In June, the government told payment platforms and banks to stop aiding transactions and issued bans on mining cryptocurrencies. Finally, two documents were released in September. How to read the latest ban Legal currency and virtual currency exchanges, buying or selling virtual currencies including overseas sales to Chinese residents , and providing information including pricing services and technical support for virtual currency are illegal currently.

They carry the threat of investigation and prosecution. Under the latest ban, the government hopes to combine offline and online investigation to best identify and investigate crypto-currency trading activity. Financial institutions are banned from providing services for cryptocurrencies, including opening accounts, funds transfers, and other activities that facilitate the use of cryptocurrencies.

Internet companies and websites are also banned from providing payment services in cryptocurrencies. Advertisements for cryptocurrencies are also prohibited, with the monitoring of key words relating to them. Governments across US and Asia have raised concerns that digital currencies increase risk, promote crime, harm investors, and affect government control of monetary systems.

The Chinese government also reported that the trading of virtual currency has contributed to the rise in gambling, fraud, money laundering, pyramid schemes, and other illegal activities. Thus, banning cryptocurrency is necessary to maintain social stability and national security. Some analysts also feel China sees cryptocurrencies as threatening to the digital yuan, an electronic currency at the advanced pilot stage.

With low electricity costs and cheap computer hardware, China has for a long time been one of the main centres for mining. Mining is so popular that gamers have previously blamed the cryptocurrency industry for the global shortage of powerful graphic cards. There are concerns that token mining is harmful for the environment and affect international environmental goals. While the crypto-minding activities have high energy consumption and carbon emissions, its contribution to the national economy is low, and the driving effect on industrial development and scientific and technological progress is limited.

In addition, the risks derived from the production and transaction of virtual currency are becoming more prominent. Believing that the blind and disorderly development of virtual currency has a negative impact on the promotion of high-quality economic and social development, energy conservation, and emission reduction, which might endanger the goals of carbon neutrality, in addition to the earlier crackdown, the recent NDRC circular stressed that investment in new cryptocurrency mining projects must be prohibited; local governments should speed up efforts to phase out existing projects, and set a reasonable timetable and path to eliminate such projects.

Meanwhile, the crackdown on cryptocurrency mining has already shown its effect. By April , this fell to 46 percent. How are crypto-currency companies reacting? Experts believe the impact has been limited as the ban was anticipated due to previous crackdowns. Data from cryptocurrency exchange Bitstamp showed that there was a volume increase in bitcoin at the time of the announcement but soon the volume decreased and the prices recovered.

CEO at investment advisory Viridi Funds, Wes Fulford, said that some forms of cryptocurrency, bitcoin in particular, showed resilience in comparison to others, such as ether. Altcoins, such as dogecoin, solana, and ripple, also fell. GURA: As cryptocurrencies get bigger and they become more mainstream in many countries, China is going against trend. In the world's second-largest economy, you're no longer able to buy them or sell them. Banks aren't allowed to process transactions.

And there's been a crackdown on the infrastructure that supports crypto. Ma says this is a government-wide effort. MA: When you have 10 ministries involved - right? And China is developing a digital version of its own currency. Prasad says lawmakers and regulators around the world will pay close attention to the rules China has put in place. PRASAD: Because of concerns about domestic financial stability, as well as illicit capital flows across international borders. GURA: This week, the Treasury Department sanctioned a site where cryptocurrency can be bought and sold because of its role in ransomware attacks.

Crypto appeals to investors, to iconoclasts and to international criminal syndicates. In the U. And I fear that if we don't address the issues, I worry a lot of people will be hurt. Now, that may sound like a lot, but that kind of volatility is very common.

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