Well... not China as a whole, but specifically the Chinese regulators. It's that time of year again where China cracks down on Bitcoin and all other cryptocurrencies. This time, Chinese regulators have tightened restrictions that ban financial institution and payment companies from providing services related to cryptocurrencies. There will be no such thing as crypto-related services. No account openings, registrations, trading, clearing, settlement, and insurance for these banks and online payment firms. This reiterates bans originally implemented in both 2013 and 2017.
The National Internet Finance Association of China, The China Banking Association, and The Payment and Clearing Association of China published a report this previous Tuesday stating the following: "Virtual currency's prices have soared and plummeted recently, resulting in a rebound of speculative trading activities of virtual currency. It as seriously damaged the safety of the people's investment and damaged the normal economic and financial orders." They also went on to state that "virtual currencies are not supported by any real value.". Although this new ban is comparable to the previous bans of 2013 and 2017, it greatly expanded the scope of prohibited services.
Let's take a look at what Chinese regulators have banned with this most-recent occurrence.
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Please do your own research before making any decisions before investing.
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This new ban makes it clear that institutions are to not accept virtual currencies, or use them as a means of payment or settlement. They also cannot provide exchange services between cryptocurrencies and the yuan or other foreign currencies. Adding on to this, institutions were also prohibited from providing cryptocurrency saving, trust, or pledging services and issuing crypto-related financial products. AND, virtual currencies must not be used as investment targets by trust and fund projects.
Banks and payment companies were also pushed to step-up their monitoring of fiat currency flows involved in crypto trading and coordinate more closely in identifying such risks.
dang, well okay then?
So how does this differ from the previous regulations set in place in previous years?
In 2013, the Chinese government defined Bitcoin as a virtual commodity and said individuals were allowed to freely trade online. Later that same year, financial regulators banned banks and payment companies from providing any sort of Bitcoin-related services. Fast-forward to 2017, and the ban on Initial Coin Offerings (ICOs) kicks in. This was allegedly aimed to protect investors and curb financial risks. These ICO rules also banned crypto trading platforms from converting fiat currencies into crypto and vice versa. This was a massive hit to trading platforms, forcing most exchanges to shut down completely or move offshore.
The ICO rules also barred financial institutions from providing services for ICOs and other cryptos, including account openings, registrations, trading, clearing, or liquidation. Does this ban sound familiar to what was currently set in place? I think so. So why tighten the reins on Chinese investors yet again?
Well, the Chinese crypto bull-run was over as of Tuesday... at least that's what the government thought/made true. Bitcoin peaked on April 14, 2021 at $64,471.79/BTC and began to see a slow decrease in value ever since. The Chinese government was worried that this continued decrease in value would disrupt people's property and normal economic and financial order. As of the current year, many Chinese investors were trading on platforms owned by Chinese exchanges that have relocated overseas. Huobi, OKEx, Binance, and MXC are all popular China-focused exchanges. They allowed Chinese individuals to open accounts online and begin trading in a matter of minutes, converting Chinese yuan into crypto via banks or online payment channels such as Alipay or WeChat Pay.
The fresh crackdown makes it more difficult for investors to buy crypto using various popular payment channels. This will also impact miners' business by making it harder for them to exchange crypto for yuan. These new rules seem to be designed to completely cut crypto-related transactions out of China's financial systems. I wouldn't be surprised of the Chinese government to roll out new regulations targeting crypto assets moving forward.
If you are new to crypto investing, don't panic. Everything will be fine. The People's Bank of China is appearing to ban Bitcoin at least once every bull cycle, so basically every 2 years. We need to take a step back and look at the bigger picture. Don't always look at the 24 hour or 7 day charts... look at where we've all come from the very beginning!
When do you think the next Chinese Bitcoin ban will be?
Let us know in the comments down below!
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