Explainer: Beijing doubles down on rooting out crypto in China

SHANGHAI (Reuters) – China’s central financial institution mentioned on Monday it had urged some banks and cost corporations to crack down more durable on cryptocurrency buying and selling, in the newest transfer by Chinese authorities to stem using digital cash.

FILE PHOTO: A small toy figurine is seen on representations of the Bitcoin digital forex displayed in entrance of a picture of China’s flag in this illustration image, April 9, 2019. REUTERS/Dado Ruvic/Illustration/File Photo

The People’s Bank of China’s assertion despatched bitcoin tumbling to a two-week low and ether to a greater than five-week low. On Tuesday, costs of main cryptocurrencies stabilised.


The PBOC assertion adopted a gathering with banks and cost corporations in which it urged them to totally verify shopper accounts, determine these concerned in cryptocurrency transactions and promptly minimize their cost channels.

China Construction Bank, Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (AgBank) and Postal Savings Bank of China attended the assembly, together with Alipay, the ever-present cost platform owned by fintech large Ant Group.

Attendees vowed to conform. AgBank mentioned that it might conduct due diligence to root out unlawful crypto-related actions and shut down suspicious accounts, and Alipay mentioned it might arrange a monitoring system concentrating on key web sites and accounts, and blacklist retailers concerned in digital forex transactions.


The newest tightening makes it far harder for people in China to commerce cryptocurrencies, even by channels which have prevented earlier restrictions.

“The regulation hasn’t modified, it’s simply the enforcement,” mentioned Bobby Lee, founder and CEO of Ballet, a cryptocurrency pockets app, and previously CEO of BTC China, China’s first bitcoin change.

The PBOC assertion additionally successfully cuts off cost channels by which mainland Chinese merchants have acquired cryptocurrencies to commerce offshore.

“Essentially this places all of the OTC platforms out of enterprise…all of the OTC platforms had been skirting the final ban, which was to not have exchanges,” Lee mentioned.

But banks and cost firms proceed to face challenges of figuring out cash flows associated to cryptocurrencies. For now, Beijing has not focused the holding of digital cash.

“Bitcoin continues to be at this level a authorized digital asset for folks to personal,” mentioned Lee. “So possibly the ultimate nail in the coffin, if it occurs in just a few years, is that they actually declare bitcoin unlawful to own.”


Last month, three business associations banned crypto-related monetary companies, and a gathering of the State Council’s Financial Stability and Development Committee chaired by Vice Premier Liu He vowed a crackdown on bitcoin mining and buying and selling as a part of efforts to fend off monetary dangers.

Bans on crypto mining have been issued in main bitcoin mining hubs, together with Sichuan, Xinjiang, and Inner Mongolia.

China’s crypto restrictions date to 2013, when monetary regulators banned banks and cost firms from offering bitcoin-related companies.

In September 2017, China banned Initial Coin Offerings (ICOs), barred monetary corporations and cost firms from offering companies for ICOs and cryptocurrencies, and banned cryptocurrency buying and selling platforms from changing between authorized tender and cryptocurrencies.

The restrictions prompted most such platforms to close down, with many transferring offshore.


This yr’s bitcoin bull run revived cryptocurrency buying and selling in China, prompting warnings from regulators over monetary dangers and cash laundering.

With native exchanges shut down, many Chinese buyers have switched to platforms owned by Chinese exchanges that had relocated abroad, together with Huobi and OKEx, or commerce over-the-counter by on-line platforms and social media buying and selling chatrooms.

China-focused exchanges, which additionally embody Binance and MXC, have allowed Chinese people to simply open accounts on-line. They have additionally facilitated peer-to-peer offers in OTC markets that assist convert Chinese yuan into cryptocurrencies. Traders make such transactions by banks or on-line cost channels corresponding to Alipay or WeChat Pay.

Retail buyers have additionally been capable of purchase “computing energy” from cryptocurrency miners, who design varied funding schemes that promise fast and fats returns.

Meanwhile, cryptocurrencies’ potential risk to China’s fiat forex, the yuan, has spurred the PBOC to launch its personal digital forex.

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

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