Explanation: Beijing steps up efforts to uproot crypto in China

SHANGHAI, June 22 (Reuters) – China’s central bank on Monday said it had urged some banks and payment companies to crack down on cryptocurrency trading, as part of the latest move by Chinese authorities to curb the use of digital coins. Read more

The People’s Bank of China statement sent bitcoin down to two-week low and ether to over five weeks. On Tuesday, the prices of major cryptocurrencies stabilized. Read more

WHAT DID THE PBOC SAY?

The PBOC statement follows a meeting with banks and payment companies in which it urged them to thoroughly verify customer accounts, identify people involved in cryptocurrency transactions, and quickly shut down their payment channels.

China Construction Bank (601939.SS), Industrial and Commercial Bank of China (ICBC) (601398.SS),, Agricultural Bank of China (AgBank) (601288.SS) and Postal Savings Bank of China (1658.HK) participated the reunion, with Alipay, the ubiquitous payment platform owned by fintech giant Ant Group.

The participants swore to comply. AgBank said it would do its due diligence to eliminate illegal crypto-related activities and shut down suspicious accounts, and Alipay said it would put in place a surveillance system targeting key websites and accounts, and would blacklist traders involved in virtual currency transactions.

WHAT IS THE IMPACT OF THE REPRESSION?

The latest tightening makes it much more difficult for individuals in China to trade cryptocurrencies, even through channels that avoided previous restrictions.

“The law hasn’t changed, it’s just the app,” said Bobby Lee, founder and CEO of Ballet, a cryptocurrency wallet app, and former CEO of BTC China, the leading bitcoin exchange. in China.

The PBOC statement also effectively cuts off the payment channels through which mainland Chinese traders have acquired cryptocurrencies to trade overseas.

“Essentially, it puts all the OTC platforms out of business… all the OTC platforms were getting around the latest ban, which was not to have trades,” Lee said.

But banks and payment companies continue to face challenges in identifying cryptocurrency-related money flows. So far, Beijing has not targeted the holding of digital coins.

“Bitcoin is still at this point a legal digital asset that people can own,” Lee said. “So maybe the last nail in the coffin, if that happens in a few years, is it that they are literally declaring that it is illegal to own bitcoin.”

HOW DID CHINA SEEK TO REGULATE THE CRYPTO?

Last month, three industry associations banned crypto-related financial services, and a meeting of the State Council’s Financial Stability and Development Committee chaired by Vice Premier Liu He vowed to crack down. Bitcoin mining and trading as part of efforts to mitigate financial risk. Read more

Crypto mining bans have been issued in major bitcoin mining hubs including Sichuan, Xinjiang and Inner Mongolia. Read more

China’s crypto restrictions date back to 2013, when financial regulators banned banks and payment companies from providing bitcoin-related services.

In September 2017, China banned initial coin offerings (ICOs), banned financial and payment companies from providing services for ICOs and cryptocurrencies, and banned trading platforms from cryptocurrencies to convert between legal tender and cryptocurrencies.

The restrictions have prompted most of these platforms to close, with many moving overseas.

WHY CHINA HAS STRENGTHENED REGULATIONS?

This year’s bitcoin bull run has revived cryptocurrency trading in China, prompting warnings from regulators about financial risks and money laundering.

With the closure of local exchanges, many Chinese investors have turned to platforms owned by Chinese exchanges that had moved overseas, including Huobi and OKEx, or are trading over-the-counter through online platforms and forums. discussion on social networks.

The China-focused exchanges, which also include Binance and MXC, have made it easy for Chinese individuals to open accounts online. They have also facilitated peer-to-peer agreements in the over-the-counter markets that help convert the Chinese yuan into cryptocurrencies. Merchants perform these transactions through banks or online payment channels such as Alipay or WeChat Pay.

Retail investors have also been able to buy “computing power” from cryptocurrency miners, who design various investment programs that promise quick and significant returns.

Meanwhile, the potential threat of cryptocurrencies to China’s fiat currency, the yuan, prompted the PBOC to launch its own digital currency.

Reporting by Andrew Galbraith and Samuel Shen Editing by Vidya Ranganathan and Jacqueline Wong

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