In its most recent financial stability report, the People’s Bank of China (PBoC) addresses decentralized finance (DeFi) and cryptocurrency regulation concerns and advocates for a global endeavor to establish comprehensive crypto regulations.
In its recent financial stability report, the Chinese central bank allocated an exclusive segment to cryptocurrency assets, emphasizing the imperative for international collaboration in regulating this sector.
The report, released on December 22nd, states that the cryptocurrency market occupies 1% of the global financial system, and its relationship with conventional finance is restricted.
In its most recent financial stability report, the PBoC, according to local industry journalist Colin Wu, has devoted a distinct section to crypto assets for the first time.
To prevent regulatory arbitrage, the central bank urged governments worldwide to adopt the “same business, same risks, same supervision” approach in its report.
The report outlined several potential hazards associated with regulatory arbitrage in cryptocurrencies, including cyber attack vulnerabilities, market manipulation concerns, and issues about DeFi government mechanisms.
Citing the collapse of the Terra ecosystem and the FTX exchange in 2022, the PBoC emphasized the critical nature of addressing regulatory fragmentation and eradicating supervision arbitrage.
China’s recommendation that the international community jointly regulate the cryptocurrency sector comes just a few years after the mainland Chinese government imposed a significant prohibition on cryptocurrencies.
The People’s Bank of China (PBoC) formally declared strategies to combat the adoption of cryptocurrencies in mainland China in 2021, advocating for enhanced interdepartmental collaboration to suppress crypto-related operations within the nation further.
China’s mainland has continued to be a significant center for cryptocurrency mining despite the ban that prohibited virtually all cryptocurrency transactions and mining.
Certain industry leaders, including Yat Siu, co-founder of Animoca, believe that the swift adoption of cryptocurrencies in Hong Kong may indicate significant developments in regulating cryptocurrencies in mainland China. Other local executives, however, believe that China’s crypto-friendly actions in Hong Kong are unrelated to its crypto-friendly stance.
