China vows to crack down on bitcoin mining, trading activities

China has banned crypto exchanges and initial coin offerings but has not barred individuals from holding crypto

Reuters May 22, 2021

China will crackdown on bitcoin mining and trading activities as part of efforts to fend off financial risks, the State Council's Financial Stability and Development Committee said on Friday.

The country will also clamp down on illegal activities in the securities market, and maintain the stability of stock, bond, and forex markets, the committee said in a meeting chaired by Vice Premier Liu He.

The statement, which comes just days after three Chinese industry bodies tightened a ban on banks and payment companies providing crypto-related services, marks a sharp escalation of moves against virtual currencies.

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Liu is the most senior Chinese official to publicly order a crackdown on bitcoin, and it is the first time the state council has explicitly targeted crypto mining activities.

Bitcoin prices fell sharply again on the news and are on course for weekly losses of more than 15%, as is Etherium.

Investor protection and prevention of money laundering are particular concerns of governments and financial regulators who are grappling with whether and how they should regulate the cryptocurrency industry.

Earlier, Hong Kong proposed the city's market regulator license cryptocurrency exchanges and only allow them to provide services to professional investors. 

"While some degree of crypto regulation is inevitable, these overly restrictive policies will result in stifled opportunity and industry flight away from Asia," said Jehan Chu, managing partner at Hong Kong blockchain venture capital firm Kenetic Capital.

China's state broadcaster CCTV on Friday warned against "systemic risks" of cryptocurrency trading in a commentary on its website.

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"Bitcoin is no longer an investment tool to avoid risks. Rather, it's a speculative instrument," the broadcaster said, adding the cryptocurrency is a lightly-regulated asset often used in black market trade, money-laundering, arms smuggling, gambling, and drug dealings.

Virtual currency mining is big business in China, accounting for as much as 70% of the world's crypto supply according to some estimates, although others say that proportion has fallen in recent years.

China's crackdown on mining "will have profound implications for global crypto markets," said Winston Ma, NYU Law School adjunct professor and author of the book "The Digital War".

Shares of Chinese crypto mining rig makers including Canaan and Ebang International Holdings also slid in New York trading.

China has banned crypto exchanges and initial coin offerings but has not barred individuals from holding cryptocurrencies.

Friday's statement also said that China's prudent monetary policy will be flexible, targeted, and appropriate, while it will keep the yuan exchange rate basically stable at reasonable and balanced levels.


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