[ad_1]
Chinese regulators have tightened restrictions that ban financial institutions and payment companies from providing cryptocurrency-related services, marking a new crackdown on digital currency.
Compared to a previous ban issued in 2017, the new rules significantly broadened the scope of the banned services and ruled that “virtual currencies are not backed by any real value.”
WHAT ARE THE NEW MEASURES?
On Tuesday, three financial industry associations ordered their members, which include banks and online payment companies, not to offer any crypto-related services, such as account opening, registration, trading, clearing, settlement and insurance, reiterating the 2017 ban.
But the new ban, which was issued by the People’s Bank of China (PBOC), also covers services that were not mentioned before.
For example, he clarified that institutions should not accept virtual currencies, nor use them as a means of payment and settlement. Institutions also cannot provide exchange services between cryptocurrencies and Yuan or foreign currencies.
In addition, institutions were prohibited from providing cryptocurrency savings, trust, or pledging services and issuing crypto-related financial products. And virtual currencies should not be used as investment targets by trust and fund products.
Banks and payment companies have also been urged to step up monitoring of the cash flows involved in cryptocurrency trading and coordinate more closely to identify these risks.
The guidelines were set out in a joint statement by the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China.
WHAT WERE THE PREVIOUS RULES IN CHINA AGAINST CRYPTO-CURRENCIES?
China does not recognize cryptocurrencies as legal tender, and the banking system does not accept cryptocurrencies or provide relevant services.
In 2013, the government defined bitcoin as a virtual commodity and declared that individuals were allowed to freely participate in its online commerce.
However, later in the year financial regulators, including the PBOC, banned banks and payment companies from providing bitcoin-related services.
In September 2017, China banned Initial Coin Offerings (ICOs) in an attempt to protect investors and limit financial risks.
The ICO rules also prohibited cryptocurrency trading platforms from converting legal tender into cryptocurrency and vice versa.
The restrictions have prompted most of these trading platforms to close, with many people moving abroad.
The ICO rules also prohibited financial and payment companies from providing services for ICOs and cryptocurrencies, including account opening, registration, trading, clearing or clearing services. liquidation.
As of July 2018, 88 virtual currency trading platforms and 85 ICO platforms had withdrawn from the market, the PBOC said.
WHY CHINA HAS STRENGTHENED REGULATIONS?
The global bitcoin bull run has boosted cryptocurrency trading in China.
Tuesday’s sector directive warned that speculative bitcoin trading had rebounded, undermining “the security of people’s property and disrupting normal economic and financial order.”
Many Chinese investors were now trading on platforms belonging to Chinese stock exchanges that had relocated abroad, including Huobi and OKEx. Meanwhile, China’s over-the-counter cryptocurrency market has become busy again, while once-inactive social media trading rooms have come back to life.
The China-focused exchanges, which also include Binance and MXC, allow Chinese individuals to open accounts online, a process that only takes a few minutes. They also facilitate peer-to-peer transactions in over-the-counter markets that help convert Chinese yuan into cryptocurrencies. These transactions are made through banks or online payment channels such as Alipay or WeChat Pay.
Retail investors also buy “computing power” from cryptocurrency miners, who design various investment programs that promise quick and significant returns.
Meanwhile, the potential threat of cryptocurrencies to China’s fiat currency, the yuan, prompted the PBOC to launch its own digital currency.
WHAT IS THE IMPACT OF THE REPRESSION?
New crackdown makes it harder for individuals to purchase cryptocurrency using various payment channels and could impact miners’ activities by making it more difficult for them to trade cryptocurrency for yuan .
But banks and payment companies also face challenges in identifying cryptocurrency-related money flows.
Winston Ma, assistant professor at NYU Law School and author of “The Digital War,” said the new rules were designed to completely eliminate crypto-related transactions from Chinese financial systems, and expects the government is implementing new regulations targeting crypto assets. .
The Hong Kongs Bitcoin Association said in a tweet in response to China’s repeated ban: For those new to bitcoin, it is customary for the People’s Bank of China to ban bitcoin at least once in a bull cycle. .
Our Standards: The Thomson Reuters Trust Principles.
[ad_2]
picture credit