CHINA IS INTENSIFYING its elimination of cryptocurrencies, banning all trading and mining and promising a crackdown on any illegal activity, according to a joint announcement by the central bank and nine other regulatory agencies.
While the campaign against crypto dates back to at least 2017, the latest announcement reaffirms May’s ban on financial institutions, payment companies and internet firms from facilitating cryptocurrency trading.
The People’s Bank of China also now says that overseas cryptocurrency exchanges providing services in mainland China will be illegal. This closes a loophole being used to evade May’s domestic trading restrictions. Any Chinese citizen aiding or abetting a foreign exchange is now explicitly at risk of investigation.
The central bank added that it had improved its systems for monitoring crypto-related transactions and speculative investing.
As for reasons, the preamble to the announcement says:
Recently, virtual currency trading hype activities have risen, disrupting economic and financial order, breeding illegal and criminal activities such as gambling, illegal fund-raising, fraud, pyramid schemes, and money laundering, and seriously endangering the safety of people’s property.
The announcement sent the prices of cryptocurrencies, notably Bitcoin tumbling, along with the share prices of crypto and blockchain-related companies.
Before the clampdown, Chinese miners accounted for more than half of the world’s crypto supply. The National Development and Reform Commission (NDRC) says ‘such activities contribute little to China’s economic growth, spawn risks, consume a huge amount of energy and hamper carbon neutrality goals’. It has told local governments that it is ‘imperative’ to wipe out crypto mining.
Crypto miners use powerful, energy-hungry computers designed to verify bitcoin transactions in a process that produces new bitcoins. That is a bad look internationally for a country touting its net zero carbon ambitions, and especially amid domestic power shortages for industry.
Following May’s crackdown, most Chinese mining relocated to Central Asia and North America, with cheap energy and policy support. However, the latest announcement suggests that not all of it has moved. The hunt is clearly on for any that remained.
None of the latest measures applies to the state digital currency, the digital yuan or e-yuan, now being trialled in several regions.