By
Temitope Olatunji
April 26th, 2024
Apart from the ban on mining, China has extended its crackdown to cover all information and financial services related to crypto.
Chinese regulators ordered a fresh crackdown on crypto mining and trading on Friday according to reports. The ban affects domiciled crypto exchanges as well as those overseas providing services in mainland China. The latest China crypto crackdown comes some months after Beijing first slapped a ban on crypto mining. The fallout from that earlier ban in May forced a lot of crypto exchanges and mining firms to exit the country.
Because several mining firms took their mining equipment offline, Bitcoin’s processing power fell drastically. Furthermore, several of these companies ended up setting up shop overseas instead. Similar to the earlier crackdown, the Chinese government issued a statement on the People’s Bank of China’s site. The statement, signed by its top financial and cyberspace regulators, comprehensively lists the proscribed crypto activities. It also adds that:
“Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity.”
The Chinese government goes further by imploring all local governments to put a stop to crypto activities. Furthermore, it suggested it will investigate the workers of foreign crypto exchanges. The ban also extends to banks and other financial institutions that were offering crypto-related services. These include trading, order matching, token issuance, and derivatives for virtual currencies. The PBoC stated:
“Financial institutions and non-bank payment institutions cannot offer services to activities and operations related to virtual currencies.”
More Than Crypto Trading
In addition, the government has gone beyond crypto-related activities and calls for increased censorship of all information related to crypto. Furthermore, Chinese regulators plan to put in place a mechanism that preempts all propaganda linked to crypto trading and mining activities. The system will make sweeping searches of crypto-related transactions and root out speculative investing. China’s economic planning agency stated this crackdown is imperative for the country to meet its carbon goals.
The New China Crypto Crackdown Follows the Ongoing Evergrande Debt Crisis
This latest harsh directive from the Chinese government comes amid increasing worry over China Evergrande Group’s debt crisis. The potential loan default by the second-largest real estate firm in the nation sent shockwaves throughout the equities global market.
Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore, weighed in on the crackdown. Ayyar said that although Beijing took a similar stance in the past, things look more uncertain for crypto now. Recent statements by the SEC regarding increased oversight and Evergrande’s precarious situation have created a “slightly nervous environment for crypto.” Therefore naturally, comments of this nature might trigger a sell-off in risky assets.
Antoni Trenchev, co-founder of crypto lender Nexo, also commented on how the crackdown would affect investors. In Trenchev’s words, investors should expect a “knee-jerk price reaction as China takes the wind out of Bitcoin’s sails.” The Nexo co-founder further stated that “The recent rebound from just below $40,000 has likely run its course for now.”
BTC price dropped by about 4% in the aftermath of the news. The leading token last changed hands at around $42,378. Ethereum also slumped by over 8% to $2,868.