China has effectively banned crypto. While the news should not come as any surprise as China has been tightening the regulatory vice for years now, statements by the People’s Bank of China indicate that any hope of crypto access is now dashed for consumers and businesses.
The PBoC said that overseas virtual currency exchanges that use the internet to offer services to domestic residents are considered illegal financial activity. The news helped to push the price of just about all cryptocurrencies lower with Bitcoin dropping by around 5% and Ethereum sinking around 10%. In a public notice the PBoC stated:
“Bitcoin and other virtual currency transaction hype activities … [have been] disrupting economic and financial order, breeding money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities, and seriously endangering the safety of people’s property.” [translated]
Over the years, China has taken multiple steps in closing the domestic crypto market as some consumers attempted to skirt the rules. Meanwhile, China has been at the forefront of creating a central bank digital currency (CBDC) or digital yuan that is not really based on distributed ledger technology.
While Chinese regulators have taken more draconian measures designed to crush private currencies, the US is also going through a period of retrenchment in the digital asset sector as regulators have been stating there is a greater need to regulate the market including stablecoins. Recently, SEC Chairman Gary Gensler said that just about all cryptocurrenciers were securities thus queuing them up for potential enforcement actions as flouting existing security law.
The notice by the PBoC in its entirety is below (translated):
The relevant person in charge of the People’s Bank of China answered reporters’ questions on the “Notice on Further Preventing and Disposing of the Risks of Hype in Virtual Currency Transactions”
Communication 2021-09-24 17:00:21
Recently, the People’s Bank of China and other ten departments issued the “Notice on Further Preventing and Disposing of the Risks of Hype in Virtual Currency Transactions” (hereinafter referred to as the “Notice”). The relevant person in charge of the People’s Bank of China answered reporters’ questions on related issues.
1. What is the background of the “Notice”?
In recent years, Bitcoin and other virtual currency transaction hype activities have prevailed, disrupting economic and financial order, breeding money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities, and seriously endangering the safety of people’s property. In accordance with the decisions and deployment of the Party Central Committee and the State Council, the People’s Bank of China, in conjunction with relevant departments, has introduced a series of policies and measures to clarify that virtual currencies do not have legal tender status, prohibit financial institutions from developing and participating in virtual currency-related businesses, and clean up and ban domestic virtual currency transactions and token issuance financing The platform continued to carry out risk warning and financial consumer education, and achieved positive results. In order to establish a normalized work mechanism and always maintain a high-pressure crackdown on virtual currency trading hype activities, the People’s Bank of China and other departments have combined the new risk situation and drafted the “Notice” on the basis of summing up the previous work experience.
2. How does the “Notice” characterize virtual currencies and related business activities?
my country’s regulatory policies on virtual currencies are clear and consistent. The “Notice” once again emphasizes that virtual currencies that are issued by non-monetary authorities, use encryption technology, distributed accounts or similar technologies, and exist in digital form, such as Bitcoin, Ethereum, etc., including so-called stable currencies such as TEDA, are not It has the same legal status as legal tender and cannot be circulated in the market as currency. The “Notice” clearly states that virtual currency exchange, virtual currency trading as a central counterparty, provision of matching services for virtual currency transactions, token issuance financing, and virtual currency derivative transactions are all illegal financial activities and are strictly prohibited. , Resolutely banned in accordance with the law; overseas virtual currency exchanges to provide services to Chinese residents through the Internet are also illegal financial activities.
3. What work measures are proposed in the “Notice”?
The first is to establish a normalized work mechanism for departmental coordination and central-regional linkage. At the central level, ten departments including the People’s Bank of China, the Central Cyberspace Administration of China, and the Ministry of Public Security have established a coordination mechanism to coordinate and promote the implementation of work as a whole; at the local level, the provincial people’s governments implement territorial risk handling responsibilities, and ban and crack down on illegal virtual currencies in their jurisdictions in accordance with the law Financial activities.
The second is to strengthen the monitoring and early warning of the risk of speculation in virtual currency transactions. The People’s Bank of China and the Central Cyberspace Administration of China have improved the functions of virtual currency monitoring technology platforms to improve the accuracy and efficiency of identifying and discovering virtual currency transaction hype activities. Financial institutions and non-bank payment institutions have strengthened their monitoring of virtual currency transaction funds. All departments and regions strengthen the effective connection of online monitoring, offline research and arrangement, and fund monitoring, and establish information sharing and cross-validation mechanisms.
The third is to build a multi-dimensional, multi-level virtual currency transaction speculation risk prevention and disposal system. Financial management departments, cybersecurity and informatization departments, telecommunications departments, public security departments, and market supervision departments work closely together to cut off payment channels, dispose of relevant websites and mobile applications in accordance with the law, strengthen the registration and advertising management of relevant market entities, and crack down on relevant illegal financial activities in accordance with the law. Comprehensive measures are implemented in such aspects as illegal and criminal activities, and relevant industry associations have strengthened member management and policy publicity, and comprehensively prevented and dealt with the risks of virtual currency transaction speculation.
4. What are the follow-up work arrangements?
Cracking down on the speculation of virtual currency transactions is an important decision and deployment made by the Party Central Committee and the State Council. It is an inevitable requirement for the implementation of the people-centered development concept and the implementation of the overall national security concept. All departments and regions will conscientiously implement the various measures proposed in the “Notice”, build a long-term work mechanism that is coordinated by the central government, implemented by territories, combined with different disciplines, and jointly responsible, always maintain a high-pressure situation, dynamically monitor, and timely deal with related risks. Resolutely curb the hype of virtual currency transactions, severely crack down on illegal financial activities and illegal criminal activities related to virtual currencies, protect the safety of the people’s property in accordance with the law, and make every effort to maintain economic and financial order and social stability.