Chinese regulators have fixed limitations that boycott monetary organizations and installment organizations from offering types of assistance identified with cryptocurrency, denoting a new crackdown on advanced coins.
A significant number of the new guidelines develop past limitations focused on digital forms of money and close escape clauses that had permitted some account and installment firms to proceed in the exchange.
WHAT ARE THE NEW MEASURES?
Three financial industry associations on Tuesday directed their members, which include banks and online payment firms, not to offer clients any services involving cryptocurrencies, such as currency exchanges, registration, trading, clearing, and settlement.
The directives were made in a joint statement from the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China, and posted by the People’s Bank of China (PBOC).
Additionally, institutions were prohibited from providing cryptocurrency saving, trust, or pledging services and issuing financial products related to cryptocurrencies. Crypto-related information services, insurance, and derivatives trading are also banned.
WHAT WERE EARLIER RULES IN CHINA AGAINST CRYPTOCURRENCIES?
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 said individuals were allowed to freely participate in its online trade.
However, later that 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 a bid to protect investors and curb financial risks.
The ICO rules also banned cryptocurrency trading platforms from converting legal tender into cryptocurrencies and vice versa.
The ICO rules also barred financial firms and payment companies from providing services for ICOs and cryptocurrencies, including account openings, registration, trading, clearing or liquidation services.
By July 2018, 88 virtual currency trading platforms and 85 ICO platforms that had withdrawn from the market, the PBOC said.
WHY HAS CHINA TIGHTENED REGULATION?
The global bitcoin bull run has revived cryptocurrency trading in China.
Tuesday’s industry directive warned speculative bitcoin trading had rebounded, infringing “the safety of people’s property and disrupting the normal economic and financial order.”
Many Chinese investors were now trading on platforms owned by Chinese exchanges that had relocated overseas, including Huobi and OKEx. Meanwhile, China’s over-the-counter market for cryptocurrencies has become busy again, while once-dormant trading chartrooms on social media have revived.
China-focused exchanges, which also include Binance and MXC, allow Chinese individuals to open accounts online, a process that takes just a few minutes. They also facilitate peer-to-peer deals in OTC markets that help convert Chinese yuan into cryptocurrencies. Such 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 schemes that promise quick and fat returns.
Meanwhile, cryptocurrencies’ potential threat to China’s fiat currency, the yuan, has spurred the PBOC to launch its own digital currency.