Oman Daily Observer

China intensifie­s crypto crackdown

- — Reuters

SHANGHA: China’s most powerful regulators on Friday intensifie­d the country’s crackdown on cryptocurr­ency with a blanket ban on all crypto transactio­ns and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain­related stocks.

Ten agencies, including the central bank as well as banking, securities and foreign exchange regulators, vowed to work together to root out “illegal” cryptocurr­ency activity, the first time the Beijing-based agencies have joined forces to explicitly ban all cryptocurr­ency-related activity.

China in May banned financial institutio­ns and payment companies from providing services related to cryptocurr­ency transactio­ns, and issued similar bans in 2013 and 2017. The repeated prohibitio­ns highlight the challenge of closing loopholes and identifyin­g bitcoin-related transactio­ns, though banks and payment firms say they will support the efforts.

Friday’s statement is the most detailed and comprehens­ive yet from the country’s most powerful regulators, underscori­ng Beijing’s commitment to suffocatin­g the Chinese crypto market.

“In the history of crypto market regulation in China, this is the most direct, most comprehens­ive regulatory framework involving the largest number of ministries,” said Winston Ma, NYU Law School adjunct professor.

The move comes amid a global cryptocurr­ency crackdown as government­s from Asia to the United States fret that privately operated highly volatile digital currencies could undermine their control of the financial and monetary systems, increase systemic risk, promote financial crime and hurt investors.

They also worry that “mining,” the energy-intensive process through which bitcoin and other tokens are created by high performing computers, is underminin­g global environmen­tal goals.

Chinese government agencies have repeatedly raised concerns that cryptocurr­ency speculatio­n could disrupt the country’s economic and financial order, one of Beijing’s top priorities.

Analysts say authoritie­s also see cryptocurr­encies as a threat to China’s own sovereign digital-yuan, which is at an advanced pilot stage.

“China has been known to go to extremes with either very assertive statements and prosecutio­ns to complete radio silence,” said George Zarya, CEO of Bequant crypto exchange in London.

“This time the point was made very clear that China will not support cryptocurr­ency market developmen­t as it goes against its policies of tightening up control over capital,” he said.

The People’s Bank of China (PBOC) said cryptocurr­encies must not circulate and that overseas exchanges are barred from providing services to mainland investors. It also barred financial institutio­ns, payment companies and Internet firms from facilitati­ng cryptocurr­ency trading nationally.

The Chinese government will “resolutely clamp down on virtual currency speculatio­n, and related financial activities and misbehavio­ur in order to safeguard people’s properties and maintain economic, financial and social order”, the PBOC said. Bitcoin, the world’s largest cryptocurr­ency, dropped more than 9 per cent to $40,693 on the news, having earlier been down about 1 per cent.

Smaller coins, which typically rise and fall in tandem with bitcoin, also tumbled. Ether fell 10 per cent while XRP dropped a similar amount.

Friday’s statement comes after cabinet vowed in May to crack down on bitcoin mining and trading as part of a broader effort to mitigate financial system risks, without going into details. That threat sent cryptocurr­encies tumbling, with bitcoin alone slumping 30 per cent in a day. Friday’s news dashed hopes among many in the industry that the May crackdown would be short-lived.

“This is the manifestat­ion of the crypto mining and trading crackdown announceme­nt by China’s central government back in May,” said Ma.

The move also hit cryptocurr­ency and blockchain-related shares.

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