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China Declares All Cryptocurrency-related Activities Illegal; Warns Investors

China’s central bank on Friday, September 24, called digital currency activities illegal and has pledged to crackdown on the entire market, as per reports.


Image: Unsplash/Representative

China’s central bank on September 24 called digital currency activities illegal and has pledged to crackdown on the entire market. CNBC cited the Question & Answer posted to its website to state that the People’s Bank of China (PBOC) said services that offer trade, order matching, token issuance and derivatives for virtual currencies are strictly prohibited. PBOC has reportedly also stated that foreign crypto exchanges providing services in mainland China are also deemed illegal. 

According to CNBC’s translation of the remarks published on the website, PBOC has said, “China’s central bank says all cryptocurrency-related activities are illegal, vows harsh crackdown.” Meanwhile, it added that workers of foreign crypto exchanges will be investigated by the authorities. 

The PBOC has said that it has also enhanced its systems to step up monitoring of crypto-related transactions and root out speculative investing. Reiterating its previous comments, the bank reportedly said, “Financial institutions and non-bank payment institutions cannot offer services to activities and operations related to virtual currencies.”

Meanwhile, as per CoinMetrics data, the price of bitcoin sank over 3% on a 24-hour basis with the last trading around $42,239. Ethereum which is considered the second-largest digital asset dropped by 7% to $2,860. The stocks that have massive exposure to crypto also plunged in premarket trading with Coinbase down by nearly 4%, MicroStrategy slipping 5% and Riot Blockchain down with more than 6%. 

China bans crypto exchanges in May

China on May 18 announced that the country’s financial institutions and payment companies have been banned from providing any services related to cryptocurrency transactions and has even warned the investors against speculative crypto trading. The crackdown by Chinese officials earlier this year, according to a Forbes report, is in light of the market’s recent volatility. It also marks another blow to the nascent market reeling from one of its biggest sell-offs ever after booming institutional adoption helped to reach highs during the COVID-19 pandemic. 

Under the ban, Chinese financial institutions are not allowed to offer clients any service involving cryptocurrencies. China’s three industry bodies said in a joint statement on Tuesday, “Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people's property and disrupting the normal economic and financial order. Judging from the current judicial practise in my country, virtual currency transaction contracts are not protected by law,” it added. 

China suspends cryptocurrency-related accounts

Meanwhile, Chinese social media accounts related to cryptocurrencies were blocked over the weekend by Sina Weibo, reported Global Times on June 6. The blocked accounts had followers ranging from several thousand to several hundred thousand and featured some of the most prominent players in the virtual currency system including Trader Xiaoxia, Fat Nerds Bitcoin, Super Bitcoin and Blockchain William. Reportedly, some of the barred account owners are billionaires owing to investments in cryptocurrencies. 

The latest move over the weekend came as China continues to scrutinise the digital currency industry in order to prevent what they call systematic financial risks as well as illegal activities including money laundering. As per the report, the suspension of accounts related to cryptocurrencies were apparently accrued out by Sina Weibo, the Chinese social media platforms. Reportedly, on searching those accounts on the platform, Sina Weibo shows that they’re blocked because they are suspected of violating relevant laws and regulations concerning the platform’s community conventions. 

Image: Unsplash/Representative

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