China’s most powerful regulators on Friday intensified the country’s crackdown on cryptocurrency with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.
A total of 10 agencies, including the central bank as well as banking, securities and foreign exchange regulators, vowed to work together to root out “illegal” cryptocurrency activity, the first time the Beijing-based agencies have joined forces to explicitly ban all cryptocurrency-related activity.
China in May banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and issued similar bans in 2013 and 2017. The repeated prohibitions highlight the challenge of closing loopholes and identifying bitcoin-related transactions, though banks and payment firms say they will support the efforts.
Friday’s statement is the most detailed and comprehensive yet from the country’s most powerful regulators, underscoring Beijing’s commitment to suffocating the Chinese crypto market.
“In the history of crypto market regulation in China, this is the most direct, most comprehensive regulatory framework involving the largest number of ministries,” said Winston Ma, NYU Law School adjunct professor.
The move comes amid a global cryptocurrency crackdown as governments from Asia to the United States fret that privately operated highly volatile digital currencies could undermine their control of the financial and monetary systems, increase systemic risk, promote financial crime and hurt investors.
They also worry that “mining”, the energy-intensive process through which bitcoin and other tokens are created by high performing computers, is undermining global environmental goals.
Chinese government agencies have repeatedly raised concerns that cryptocurrency speculation could disrupt the country’s economic and financial order, one of Beijing’s top priorities.
Analysts say authorities also see cryptocurrencies as a threat to China’s own sovereign digital yuan, which is at an advanced pilot stage.
“China has been known to go to extremes with either very assertive statements and prosecutions to complete radio silence,” said George Zarya, CEO of Bequant crypto exchange in London.
“This time the point was made very clear that China will not support cryptocurrency market development as it goes against its policies of tightening up control over capital,” he said.
The People’s Bank of China (PBOC) said cryptocurrencies must not circulate and that overseas exchanges are barred from providing services to mainland investors.
It also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading nationally.
The Chinese government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehaviour in order to safeguard people’s properties and maintain economic, financial and social order”, the PBOC said.
Bitcoin, the world’s largest cryptocurrency, dropped more than 9% to $40,693 on the news, having earlier been down about 1%.
Smaller coins, which typically rise and fall in tandem with bitcoin, also tumbled. Ether fell 10% while Ripple dropped a similar amount.
Friday’s statement comes after cabinet vowed in May to crack down on bitcoin mining and trading as part of a broader effort to mitigate financial system risks, without going into details. That threat sent cryptocurrencies tumbling, with bitcoin alone slumping 30% in a day.
Friday’s news dashed hopes among many in the industry that the May crackdown would be short-lived.
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