- China steps up crypto crackdown
- Swears to eradicate “illegal” business activities, bans mining
- Bitcoin, small coins are collapsing
SHANGHAI / LONDON, Sept. 24 (Reuters) – China’s most powerful regulators stepped up cryptocurrency crackdown on Friday with a blanket ban on all crypto transactions and mining, hitting bitcoin and other coins major and putting pressure on crypto and blockchain-related stocks.
Ten agencies, including the central bank, financial, financial and currency regulators, have pledged to work together to eliminate “illegal” cryptocurrency activity, the first time Beijing-based regulators have joined forces to ban explicitly any activity related to cryptocurrency.
Explanation: What’s new in the crackdown on crypto in China?
In May, China banned financial institutions and payment companies from providing services related to cryptocurrency transactions and issued similar bans in 2013 and 2017.
The repeated bans highlight the challenge of closing the loopholes and identifying bitcoin-related transactions, although banks and payment companies say they are supporting the effort.
Friday’s statement is the most detailed and expansive to date from the country’s major regulators, underscoring Beijing’s commitment to choke off the Chinese crypto market.
“In the history of regulating the crypto market in China, this is the most straightforward and comprehensive regulatory framework involving the largest number of government departments,” said Winston Ma, assistant professor at NYU Law. School.
The move comes amid a global crackdown on cryptocurrencies, as Asian governments in the United States fear that highly volatile digital currencies exploited by the private sector could undermine their control over financial and monetary systems, increasing systemic risk, promote financial crime and harm investors.
They also fear that “mining,” the energy-intensive computer process by which bitcoin and other tokens are created, could harm global environmental goals.
Chinese government agencies have repeatedly expressed fears that cryptocurrency speculation could disrupt the country’s economic and financial order, one of Beijing’s top priorities.
Analysts say China also sees cryptocurrencies as a threat to its sovereign digital yuan, which is at an advanced pilot stage.
“Beijing is so hostile to economic freedom that it cannot even allow its people to participate in what is arguably the most exciting financial innovation in decades,” Republican US Senator Pat Toomey tweeted.
As US regulators closely monitor digital asset risks, they have said they also offer opportunities, including to promote financial inclusion.
‘THE SOCIAL ORDER’
The People’s Bank of China (PBOC) has said cryptocurrencies should not be circulated and that foreign exchanges are prohibited from providing services to investors based in China. It has also banned financial institutions, payment companies, and internet companies from facilitating nationwide cryptocurrency trading.
The government “will resolutely crack down on speculation in virtual currency (…) to protect people’s property and maintain economic, financial and social order,” the PBOC said.
China’s National Development and Reform Commission has said it will work to cut financial support and electricity supply for mining, which it says poses risks and hinders neutrality goals. carbon.
Bitcoin, the world’s largest cryptocurrency, fell more than 9% before reducing those losses. It was down 6.6% to $ 41,937 around 12:00 p.m. ET. Smaller coins, which typically mimic bitcoin, have also fallen.
The Chinese cabinet vowed in May to crack down on bitcoin mining and trading as it sought to mitigate financial risk, without going into detail, by dropping bitcoin by 30% in one day. Friday’s news dashed crypto enthusiasts’ hopes that the firm would not follow through on its threat.
âThis is the manifestation of the crackdown on crypto mining and tradingâ¦ in May,â said Ma of NYU.
The move has hit cryptocurrency and blockchain-related stocks as well, although they recouped some of those declines in morning trading in the United States.
U.S.-listed miners Riot Blockchain (RIOT.O), Marathon Digital (MARA.O) and Bit Digital (BTBT.O) slipped between 2.5% and 5%, while the San Francisco crypto exchange Coinbase Global (COIN.O) fell just over 1%.
Despite the initial shock, analysts said they did not expect the crackdown to drive down global prices for crypto assets in the long run, as companies continue to adopt crypto products and services.
However, the exposure of major crypto exchanges and payment companies was not immediately clear. Binance, the world’s largest, has been stranded in China since 2017, a spokesperson said. A Coinbase spokesperson declined to comment. Global payments company PayPal (PYPL.O) does not offer crypto services in China, a spokesperson said.
Crypto exchanges OKEx and Huobi, which are originally from China but are now based overseas, will likely be the most affected as they still have Chinese users, analysts said. Tokens associated with the two exchanges plunged more than 20%. The exchanges did not immediately respond to requests for comment.
However, the Chinese government has fought in the past to prevent internet users from evading its controls.
âChina’s stocks haven’t held back the rise of crypto too much in the past, so I wouldn’t be surprised to see it rebound once again,â wrote Craig Erlam, analyst at currency broker OANDA.
Virtual currency mining was big business in China before May, accounting for more than half of the world’s crypto supply, but miners have moved overseas.
âThe losers in all of this are clearly the Chinese,â said Christopher Bendiksen, head of research at digital asset manager CoinShares. “They will now lose about $ 6 billion in annual mining revenues, all of which will go to other mining regions in the world,” he added, citing Kazakhstan, Russia and the United States.
Report from the SHANGHAI newsroom; Alun John in Hong Kong and Tom Wilson in London; additional reporting by Krystal Hu in New York; written by Michelle Price in Washington; edited by Nick Macfie, Carmel Crimmins, Emelia Sithole-Matarise and Giles Elgood
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