What’s new in China’s crackdown on cryptocurrency?

Posted:

September 25, 2021, 00:51 GMT

The authorities of the Asian giant announced, on Friday, that “all commercial operations related to virtual currencies are illegal and must be strictly prohibited and suppressed.”

China intensified its policies against digital currencies on Friday, after confirming that it would fight hard in its territory against transactions in cryptocurrencies, which Beijing classifies as an illegal payment method.

According to the authorities of the Asian giant, in recent years the unbridled expansion of virtual currencies such as Bitcoin disturbed the economic and financial systemfavoring criminal activities such as money laundering and putting the security of everyone’s property at serious risk, Pick up Xinhua Agency.

what’s new?

Although China has been setting increasingly strict rules on cryptocurrencies, it is now a new step, declaring all activities related to it illegal and issuing an alert that it plans to be more strict in enforcing the rules.

“All business operations related to virtual currencies are illegal and It should be strictly prohibited and suppressed In accordance with the law,” reads a statement issued jointly by 10 organizations in the Asian giant, including Banco Popular, banks, securities and currency regulators.

The country’s central bank has declared it illegal to facilitate cryptocurrency trading and announced that those who do so will be severely punished, even if they work for foreign platforms from China. Meanwhile, the National Development and Reform Council will launch a nationwide offensive against cryptocurrency mining, in an attempt to remove the entire sector, reach Reuters.

The campaign is on the rise

China Cryptocurrency is not recognized as legal tenderTheir banking system does not accept them or provide related services. Although the government defined bitcoin in 2013 as a virtual good and declared that individuals could freely engage in online commerce, in the same year financial regulators, including Banco Popular, banned banks and payment companies from lending. encoded mentioned.

In September 2017, Beijing banned initial coin offerings (ICOs), in an effort to protect investors and reduce financial risk. The regulations also prevented virtual currency exchanges from converting legal tender into cryptocurrencies and vice versa. The restrictions led to the closure of most of these platforms Many of them have moved abroad.

In addition, financial and payment companies have been banned from other services related to cryptocurrency, including account opening, registration, trading, clearing and settlement services. By July 2018, a total of 88 virtual currency exchanges and 85 ICOs had been withdrawn from the Chinese market, according to data from the country’s central bank.

Why does China continue to tighten its policy against cryptocurrencies?

The massive surge in the price of Bitcoin and other currencies over the past year has revitalized crypto trading in China, as investors search and find ways to circumvent existing regulations. This happens at a time when The country is trying to develop its own official digital currency, with the goal of becoming the first major economy to do so.

Earlier this year, regulators in the Asian country tightened restrictions that prevent financial institutions and payment companies from providing services related to cryptocurrency.

Today, many domestic investors operate on Chinese-owned platforms that have moved abroad, such as Huobi and OKEx. in the meantime, The OTC cryptocurrency market is back on the right track, as well as trading rooms, which were previously inactive on social networks, were revived. Exchanges focused on the Asian giant – such as Binance and MXC – focus on allowing Chinese individuals to open accounts online, while facilitating peer-to-peer transactions in over-the-counter markets that help convert the Chinese yuan into cryptocurrencies.

For their part, retail investors often buy “computing power” from crypto miners, who design diversified investment plans with the promise of fast and substantial returns.

Will it have an impact on the cryptocurrency market?

Restrictions Announced Friday Cause Bitcoin to Work will fall By 5% just half an hour after the news broke. These dynamics were also reflected in other cryptocurrencies, causing Ether to fall by 8% and XRP by about 7%.

However, this decline was less pronounced than what was observed last May, when China’s State Council promised to take it procedures Strong against bitcoin mining.

Economist Leopoldo Moreno de la Cova told RT that the latest ban will not significantly affect the price and future of cryptocurrencies globally. “The fact that China is banning Bitcoin is… Reassert its power And the extent of its independence from states, entities and individuals with great influence.”

Meanwhile, some analysts have built on what came before to ensure determined investors continue to find ways to trade. “Although retailers in China will no longer be able to access online exchange platforms, which are now illegal cryptocurrency funds They will be able to transfer their money management abroadGanesh Viswanath Natraj, assistant professor of finance at Warwick Business School, UK, told Reuters.

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