China’s financial officials stated on Tuesday (May 18) they have banned the country’s financial sector from providing services related to cryptocurrency transactions in light of the market’s recent volatility.
Additionally, internet platform companies are banned from providing marketing and publicity, among other services, to cryptocurrency related products.
“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” China’s National Internet Finance Association, Banking Association (CBA), and Payment and Clearing Association said in a joint statement.
“Judging from the current judicial practice in my country, virtual currency transaction contracts are not protected by law.”
The statement by the three industry bodies also highlighted the risks of cryptocurrency trading, saying digital tokens have “no real support value”, their prices that are “extremely easy” to manipulate and trading contracts are not protected by Chinese law. However, it doesn’t ban consumers from owning cryptocurrencies.
The moves come after China’s multiple regulatory measures to crack down on activities related to cryptocurrencies for purposes of investor protection and financial risk prevention.
In 2013, the People’s Bank of China (PBoC) barred financial institutions from handling bitcoin transactions, according to a notice from China Securities Regulatory Commission.
In 2017, China’s central bank declared initial coin offerings as illegal.
More recently, in October 2020, the PBoC published a draft law forbidding individuals from issuing cryptocurrencies. According to the draft “for anyone that violates such regulation, the PBoC will halt such activities and forfeit any proceed from the making and selling of yuan-backed digital tokens and issue a fine that is up to five times of the involved proceeds.”
In November 2020, Chinese police seized $4.2 billion cryptocurrencies earned through the PlusToken Ponzi scheme.
Of note, the PBOC has been working on a digital currency since 2014 and its moves have heightened interest among central banks and policy makers.
The PBOC has moved closer to becoming the first major central bank to launch a virtual currency, rolling out a trial for consumers and businesses in 11 cities across the country.