Financial institutions and payment companies have restrictions from offering services related to cryptocurrency which caused digital coins’ crackdown as Chinese regulators strengthened restrictions.
New Measures
Three financial industry associations ordered some banks and online payment firms not to provide customers any services. These are services that involve cryptocurrency like currency exchange, registration, trading, clearing, and settlement.
National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China, People’s Bank of China (PBOC) made a shared statement regarding the orders.
Institutions do not allow providing cryptocurrency saving, trust, or pledging services and issuing financial products that relate to crypto, including information services related to cryptocurrencies, insurance, and derivatives trading.
China’s Previous Rules for Cryptocurrencies
China does not recognize cryptos as legal tender and providing crypto-related services is not accepted.
In 2013, the government described bitcoin as a virtual commodity. It further stated that users had permission to join its online trade.
Financial regulators together with the PBOC, on the other hand, prohibited banks and payment companies from offering any services related to bitcoin later that year.
Cryptocurrency trading platforms also got restrictions from changing legal tender into cryptocurrencies, conversely, by the ICO.
Such trading platforms shut down with several relocating due to the restrictions.
Financial firms and payment companies had restrictions from giving services for ICOs and cryptocurrencies. Those of which include the opening of accounts, registration, trading, clearing services by the ICO.
According to PBOC’ statement, 88 virtual currency trading platforms and 85 ICO platforms extracted from the market by July of 2018.
Reason for China’s Strict Regulations
Cryptocurrency trading returned in China by the global bitcoin bull run.
Several Chinese investors were currently exchanging on platforms owned by Chinese trading. These had moved overseas, such as Huobi and OKEx. In the meantime, the over-the-counter cryptocurrencies market in China has gained popularity. Whereas, these temporarily inactive trading chatrooms on social media have recovered.
China-focused exchanges, including Binance and MXC, let Chinese people open online accounts. Peer-to-peer deals in OTC markets also facilitate which helps Chinese yuan to be converted into cryptocurrencies. These transactions are through banks or online channel payments like Alipay or WeChat Pay.
Crackdown’s Impact
Buying cryptocurrencies using different payment channels has been tougher for people due to the recent crackdown. This could affect the business of miners in a way that exchanging cryptocurrencies for yuan would be harder for them.
Banks and payment companies also faced challenges of identifying money movements related to crypto.
A tweet response to China’s repeated ban from Hong Kong’s Bitcoin Association stated new bitcoin users, it is normal for the People’s Bank of China to sometimes prohibit bitcoin once in a bull cycle.
