China's State Council has reported that the country will continue to strengthen its crackdown on cryptocurrency trading, while the former PboC governor expresses concerns about the success of DeFi.
At the second half meeting of the Central Committee of the Party and the State Council of China, held last Saturday, where the People's Bank of China (PboC) participated, the country's financial authorities reported that will continue to crack down on the trade of cryptocurrencies, to minimize the financial risks of this growing industry, while they begin to worry about DeFi.
During the meeting, the committee members stated that the Asian power has been implementing a set of rules and regulations to ensure its financial stability and sustainability and its monetary policy, focusing on different areas of the sector. Now, to continue guaranteeing its economic development and efficiently minimizing potential financial risks, the People's Bank of China will continue to strengthen its regulation on the cryptocurrency market, suggesting that the industry could face further repression in the country.
Since the second quarter of the year, China began to increase regulatory pressure on the crypto industry, prohibiting banks and financial institutions from providing services with bitcoin and other cryptoassets, prohibiting interaction and commercial operations with exchanges and crypto exchange platforms and exercising strict control over the companies of bitcoin mining; to the point of forcing many miners to close their facilities and migrate out of the country.
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Increased regulatory pressure
Yi Gang, Governor of the PboC, who attended the meeting held by the Party Central Committee and the State Council of China, posted the conclusions of the meeting on the bank's official website, showing his support for the decision to further promote the development of traditional financial services and continue to crack down on cryptocurrency trading. The PboC's policy is to monitor potential illegal activities that may occur with these digital assets.
Since 2013, the Chinese government has been implementing regulatory measures to control the cryptocurrency industry. However, since the second half of this year, these measures have been strengthened and intensified in order to exert greater and stricter control over the crypto industry that will allow the country to guarantee its global economic hegemony and prepare the ground for the implementation of the digital yuan next year.
DeFi is also in China's sights
The development of cryptocurrencies in recent years has raised the alarm of regulators, who see digital assets as potential risks to the stability of their financial systems. However, for many, a new threat is awakening with the development and growth of decentralized finance, called DeFi for its acronym in English.
According to the latest statements by Li Lihui, former governor of the PboC, DeFi is beginning to raise concerns among Chinese regulators. Lihui stated that the mechanics behind DeFi may endanger the stability and sustainability of the traditional financial system, as this new financial model promotes the total disintermediation of the system.
Lihui explained that the protocols of the decentralized financial ecosystem can end up destroying the traditional financial system since they facilitate and allow users to enter and access completely decentralized financial services, in an automated way and free of intermediaries. Also, volatility and speculation are two elements present in decentralized finance that can have a great impact on investors and the financial system.
$71 million deposited in DeFi
DeFi is a sector of the crypto industry that has seen exponential growth in the last year. According to data from DeFi Pulse, in the ecosystem of Ethereum DeFi has grown by more than 1.600% since August of last year, when the liquidity of these protocols barely exceeded $4.200 billion. At the time of this edition, DeFi accumulates value for more than 71.000 million on the ethereum network.
Race against cryptocurrencies
In addition to cryptocurrencies and DeFi, the PboC is also looking at stablecoins as a potential threat to its financial stability, and is therefore preparing new measures to control possible risks, it reported a few weeks ago.
So far, Chinese regulators want to exert greater oversight and control over the crypto industry to beat bitcoin and the rest of crypto assets. China is just months away from launching its own sovereign digital currency, so the presence of decentralized and global cryptocurrencies, such as bitcoin, or private digital currencies, such as stablecoins, within their market could affect their development and expansion plans.
At the moment, Chinese regulators have not completely banned the use of cryptocurrencies in the country.
Continue reading: China looks at Tether and announces “some measures” against stablecoin risks
