China has banned any financial institution and payment companies from doing cryptocurrency-related business. Despite the ban on crypto exchanges and initial coin offerings, the cryptocurrency market in the country was flourishing.
The move signals China’s continued action on any cryptocurrency activity within its borders, which is also having an impact on the rest of the world. In this case, for example, bitcoin quickly fell to a four-month low of $ 31,926, according to CoinDesk, before bouncing back to around $ 40,000. Several other major cryptocurrencies have also declined sharply.
Also, Check out Why Crypto Market is Going Down?
China Bans Bitcoin & Other Crypto Currencies Within its Territories!
Under China’s crypto ban, such institutions, including banks and online payment channels, should not provide customers with any cryptocurrency-related services such as registration, trading, clearing, and settlement, the three industry bodies said in a joint statement on Tuesday.
According to the statement, “Recently, cryptocurrency prices have skyrocketed and fallen, and speculative trading has reversed, severely violating the security of people’s assets and disrupting the general economic and financial system.”
“China has banned cryptocurrency exchanges and initial coin offerings (ICOs) but has not banned individuals from holding cryptocurrencies. The statement also stated that institutions should not provide savings, trust, or mortgage services of cryptocurrency, nor issue cryptocurrency-related financial products.
The statement highlighted the risks of cryptocurrency trading, stating that virtual currencies are “not supported by the real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.
Its not the 1st Time China Crack down on Cryptocurrencies
The move was not Beijing’s first move against digital currency. In 2017, China shut down its local cryptocurrency exchanges, upsetting a speculative market that held 90% of the global bitcoin trade.
In June 2019, the People’s Bank of China issued a statement stating that it would block access to all domestic and foreign cryptocurrency exchanges and initial coin offering websites, aiming to prohibit all cryptocurrency trading with restrictions on foreign exchanges.
The statement also highlighted the risks of cryptocurrency trading, stating that virtual currencies are “not supported by the real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.
Why China Ban Cryptocurrencies & Exchanges?
For stability and for a financial architecture that is poised to support rather than dominate the real economy, it should be no big surprise that Chinese authorities prohibit cryptocurrency to stem the economic shock at the burst of this bubble is.
The fact that China is the first proponent in trying to stem this bubble is a reminder that the country is at the forefront of digital currency development. But we have to distinguish between China’s attempts to make privately mined bitcoins and digital yuan.
While the former is primarily in line with the idea of a private currency that forbids the state’s exclusive right to release funds, China’s digital renminbi (RMB) is trying to do the exact opposite. It is a state-supported digital currency that enables consumers to access digital legal tender directly from their bank.
Also, Check out What is Ethereum?
Is Bitcoin & Crypto Mining Legal in China?
Given China’s stern attitude towards ICOs, cryptocurrency exchanges, and mining activities, some may believe that it would be illegal for the Chinese to hold or trade bitcoins or other cryptocurrencies. this is not right.
No PRC law or regulation prohibits Chinese investors from holding cryptocurrencies or trading cryptocurrencies. This appears to be in line with an initial notice jointly issued by five Chinese government agencies led by the PBOC in 2013, which defined bitcoin as a special virtual commodity, but not a currency.
This notice also clearly provides that bitcoin does not have legal status as a currency and should not be circulated and used in the market as a currency. This should be the position taken by the PBOC even today. Article 127 of the General Rules of China’s Civil Law, which came into effect on October 1, 2017, provides that:
“If the laws contain provisions for the protection of data and Internet virtual assets, such laws must be followed.” Some experts believe this means that one of the basic laws in China recognizes the legal status of cryptocurrencies as virtual assets.
What is China’s Policy on Crypto Trading & Crypto Mining?
On September 4, 2017, seven government agencies in China, ie the People’s Bank of China (“PBOC”), Central Cyber Security and Information Technology Major Group of the Communist Party of China, Ministry of Industry and Information Technology, State Administration for Industry and Commerce.
The China Banking Regulatory Commission, the China Security Regulatory Commission and the China Insurance Regulatory Commission jointly issued a “Notice Regarding the Prevention of Token Offering and Financing Risks”