The Chinese central bank has declared cryptocurrencies illegal in the country, so no company will be able to do any kind of operations and business with these digital assets. The main exchanges in the industry announced the suspension of their services to Chinese nationals.
China has once again dealt a blow to the cryptocurrency industry, announcing new crackdowns on these digital assets. In addition to banning bitcoin and other crypto asset mining in several regions of the country in May this year, and prohibiting financial institutions and banks from trading in these digital assets, the Central Bank of the Asian giant has now spoken out against the industry in general.
This Friday, the People's Bank of China (PboC), the country's central banking institution, issued a release The Chinese central bank has announced that it has introduced a series of policies and regulatory measures to declare that cryptocurrencies and digital assets issued by non-monetary authorities are not legal tender in the country. As such, financial institutions and other companies in China are prohibited from developing and participating in any kind of business related to crypto assets.
China's PboC also issued a statement against personal transactions and trading in cryptocurrencies, noting that these operations are now prohibited because they carry many risks for the consumer and financial investor, as well as for the nation's economic and financial order. The agency also withdrew its 2017 ban on the acquisition of funds and financing through the issuance of new tokens, through ICO (Initial Currency Offering).
In the face of new bans established by the Asian giant, the exchanges cryptocurrency exchanges announced that they will close their doors to nationals of this country before the end of the year.
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Blocking cryptocurrencies and stablecoins
One of the main concerns China cites regarding cryptocurrencies is the disruption of the financial system. According to the nation, speculation and volatility in the crypto market can disrupt the financial and economic order, risking the stability of the nation and its citizens. Thus, the PboC's new crackdown focuses on eradicating these risks by banning the use and trading of cryptoassets issued by non-financial entities.
China highlighted that those digital assets backed by fiat currencies, known as stablecoins or stablecoins, are also included within the new prohibitory measures.
The central bank's statement indicates that the new regulatory policies established on the cryptocurrency industry are clear and consistent, and that crypto assets such as Bitcoin (BTC), Ethereum (ETH), stablecoins and other assets issued by non-monetary authorities, which use the technology blockchain and the like and which only exist in digital form, cannot circulate in the Chinese market as a form of money or currency.
The bank's notice states that exchange, trading, transactions, financing through token issuance, and derivative transactions with crypto assets are illegal financial activities and strictly prohibited in China. The banking authority also declared it illegal for foreign-based cryptocurrency exchange platforms to provide digital financial services to citizens and residents of the country.
Exchanges close doors to China
New regulations are forcing cryptocurrency exchanges and platforms to close their doors in the Asian nation. Since Friday, several of these exchanges have begun to impose new measures to prevent Chinese citizens from registering on their platforms, in order to comply with the demands of the Central Bank of China.
However, according to several Reports, measures are being imposed to restrict the creation and registration of new accounts within these crypto exchange platforms, using mobile phones from mainland China. Accounts that are already created will be terminated by the end of this year to comply with the new regulation, announced some platforms. On the other hand, Hong Kong citizens can still access cryptocurrency services from some of the largest exchanges in the industry.
Crypto market crash
China's statement against the crypto industry caused a new drop in the crypto market. Bitcoin and the rest of the cryptocurrencies corrected after the Central Bank's announcement, falling more than 8% in a few hours.
However, the quotes of the main cryptocurrencies on the market, such as BTC, ETH, XRP, SOL, DOGE, DOT, ALGO, LTC, among others, are beginning to recover. The price of BTC is again above $44.000 per unit at the time of writing. Decentralized finance tokens (DeFi) are also recovering significantly. These tokens had been among the most affected by the crypto market correction. The quotes of UNI, LINK, AAVE, SUSHI, MKR, ZRX and SNX showed falls of more than 20% in the last week. However, at the time of writing, they have recovered more than 10%.
China and the digital yuan
China has been trying to ban cryptocurrencies and digital assets for several years. However, the strengthening of its regulatory measures coincides with the imminent arrival of the digital yuan. Apparently, the Asian nation wants to pave the way for its future central bank digital currency (CBDC), which will be officially launched in February next year, during the 2022 Winter Olympics.
The Asian country has stepped up testing of its sovereign digital currency in recent months, seeking to boost adoption nationwide. In July, it published the whitepaper for its CBDC for the yuan, noting that while low-value transactions will remain anonymous, large-sum transactions will be monitored.
A call for calm
Although China's strong measures against cryptocurrencies have sparked fear in the market, both Bitcoin and the rest of the cryptocurrencies have always recovered from the FUD caused by these announcements and bans. On Twitter, the crypto community itself called for calm, recalling the many times that the Chinese government has spoken out against Bitcoin and crypto assets. Anthony Pompliano he remembered that Bitcoin is an innovative technology that offers freedom and security to whoever adopts it, beyond authoritarian dictatorships.
On the other hand, although China is banning the use of Bitcoin and other cryptocurrencies, other jurisdictions and companies are promoting their use and adoption as revolutionary technologies within the financial system, such as El Salvador, Panama, Dubai, Twitter, Paypal and many others. Even US Senator Pat Toomey he pointed that the recent measures imposed by China on cryptocurrencies are an opportunity for the United States to take advantage of the Asian power and position itself as a leader in the development and adoption of these revolutionary new technologies.
Toomey called out Bitcoin “the most important financial innovation seen in decades”, which will lead to complete economic freedom, faster growth of the financial system and a better quality of life for all.
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