Top Chinese Regulator Bans Crypto Trading and Mining and Sends Bitcoin Falls

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FILE PHOTO: Taken on June 2, 2021, this illustrated photo shows the Chinese flag representing bitcoin and other cryptocurrencies. Reuters / Florence Low / Illustration / File photo

September 24, 2021

Alun John, Samuel Shane, Tom Wilson

SHANGHAI/LONDON (Reuters) – China’s strongest regulator imposed a complete ban on all crypto transactions and mining on Friday, attacking bitcoin and other major coins, putting pressure on cryptocurrencies and blockchain-related stocks. The action has been tightened.

Ten institutions, including central banks, finance, securities and forex regulators, are the first Beijing-based regulators to work together to explicitly ban all cryptocurrency-related activities. We have vowed to work together to eliminate “illegal” cryptocurrency activity.

See explainer here https://www.reuters.com/article/crypto-currency-china-explainer/explainer-whats-new-in-chinas-crackdown-on-crypto-idUSKBN2GK1FO

In May, China banned financial institutions and settlement companies from providing services related to cryptocurrency transactions, and issued similar restrictions in 2013 and 2017.

Banks and settlement companies say they support the effort, but repeatedly highlighting the challenge of closing the ban loophole and identifying bitcoin-related transactions.

Friday’s statement is the most detailed and expansive yet from the country’s major regulators, highlighting Beijing’s commitment to stifling China’s crypto market.

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

The move could allow governments from Asia to the United States to use highly private and highly volatile digital currencies to undermine financial and monetary system controls, increase systemic risk, promote financial crime, and hurt investors. . We are in the midst of a global crackdown on cryptocurrencies because we are afraid of being sexual.

They are also concerned that “mining”, an energy-intensive computing process in which bitcoin and other tokens are created, is undermining global environmental goals.

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

According to analysts, China sees cryptocurrencies in the pilot phase as a threat to sovereign digital sources.

“Beijing is so anti-economic freedom that it can’t even tolerate those who will participate in the most exciting financial innovations in decades,” tweeted US Republican Senator Pat Tomei. Down.

US regulators are scrutinizing the risks of digital assets, but they say they also provide opportunities such as promoting financial inclusion.

‘social system’

The People’s Bank of China (PBOC) said that cryptocurrencies should not circulate and foreign exchange is banned from serving Chinese-based investors. It also banned financial institutions, payment companies and Internet companies from promoting cryptocurrency transactions across the country.

The government “strictly prohibits crypto speculation in order to protect people’s assets and maintain economic, financial and social order,” the PBOC said.

China’s National Development and Reform Commission said it would work to provide financial support to the mining industry and cut power supplies, creating risks and hindering carbon-neutral targets.

Bitcoin, the world’s largest cryptocurrency, is down more than 9% before making up for these losses. It was down 6.6% at $41,937 around 12:00 ET. Smaller coins, usually imitating bitcoin, have also fallen.

In May, the Chinese cabinet promised to crack down on bitcoin mining and trading. It tried to minimize financial risk by halving bitcoin by 30% in one day without going into details. Friday’s news shattered hopes among crypto enthusiasts that the cabinet would not be able to pursue the threat.

“This is a manifestation of the announcement of the cryptocurrency mining and trading crackdown … dating back to May,” said Ma from New York University.

rebound?

The move also affected cryptocurrencies and blockchain-related stocks, but some of them declined in US morning trading.

US-listed miners Riot Blockchain, Marathon Digital and Bit Digital fell between 2.5% and 5%, while San Francisco cryptocurrency exchange Coinbase Global fell more than 1%.

Despite the initial shock, analysts said they do not expect global crypto asset prices to plummet in the long run as companies continue to adopt crypto products and services.

However, the exposure of major crypto exchanges and clearing companies was not immediately clear. According to a spokesperson, the world’s largest Binance has been blocked in China since 2017. A Coinbase spokesperson declined to comment. A spokesperson said that global payments firm PayPal does not provide cryptocurrency services in China.

Cryptocurrency exchanges OKEx and Huobi, which started in China but are now based overseas, are likely to be the most affected as they still have Chinese users, analysts said. Tokens associated with the two exchanges are down more than 20%. The exchange did not immediately respond to a request for comment.

However, the Chinese government has struggled in the past to prevent Internet users from escaping that control.

“China’s actions haven’t suppressed the rise of cryptocurrencies that much in the past, so you wouldn’t be surprised to see it bounce back,” said Craig Ahram, an analyst at currency broker OANDA.

Cryptocurrency mining was a big company in China before May, accounting for more than half of the world’s cryptocurrency supply, but miners are moving overseas.

“All these losers are clearly Chinese,” said Christopher Bendiksen, head of research at digital asset manager CoinShares. “They will now lose about $6 billion in mining revenue annually, all of which will flow to the rest of the world’s mining regions,” he said, citing Kazakhstan, Russia and the United States.

(Reporting by Shanghai Newsroom, Additional Reporting by Arun John in Hong Kong and Tom Wilson in London, Crystal Fu in New York, Writing by Michelle Price in Washington, Edited by Nick McPhee, Carmel Crimmins, Emeria Sithal, Matrice, Giles Elgood)

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