China’s Crypto Crackdown
According to a public notice issued September 24 from the People’s Bank of China (PBOC), the country’s central bank in accordance with decisions of the Party Central Committee and the State Council has shut down cryptocurrency access and transactions in the country. The notice cites concerns about “money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities” that disrupt economic and financial order and seriously endanger the safety of personal property.
“The Notice,” as it is being called, effectively criminalizes cryptocurrencies in the country disallowing financial institutions and payment companies from offering services, activities, or operations that have anything to do with them. Moving forward, foreign digital currency exchanges providing services to Mainland China are now also considered illegal. The PBOC warned that anyone who appears to violate the dictate will be “investigated for criminal liability.”
The announcement caused Bitcoin to tumble about 6.5 percent over the course of a day and Ethereum to fall 9 percent.
Harsh, But Not Surprising
This isn’t the first time China’s gotten tough on crypto. Crypto mining has also been in its crosshairs with the National Development and Reform Commission seeking to ban the practice outright. Historically, about 70 percent of global crypto mining has been taking place in the Southeast Asian country, but when the Sichuan local government made it illegal in May, there was a sudden exodus of miners in search of a home with a more relaxed regulatory environment. Many fled to the United States, and it won’t be surprising if Chinese crypto firms also follow suit.
PBOC to Introduce Its Own Central Bank Digital Crypto
The PBOC’s recent notice will pave the way for the central bank to roll out its own central bank cryptocurrency, a digital yuan with the formal name “Digital Currency Electronic Payment” or DCEP.
The country has already been testing the waters in the Shenzhen, Chengdu, and Syzhou regions. The DCEP is expected to take the place of some existing cash in circulation and be used largely for retail purchases. It may also become competitive with Alipay and WeChat Pay, two of China’s most popular mobile payment platforms.