Patrick is an accounting & economics graduate, a Cryptocurrency enthusiast, and a Blockchain technology fanatic. When not crafting informative pieces on any of the above subjects, he will be researching on how the Blockchain technology can transform the world, particularly the financial space.
On Friday, the Chinese Central Bank declared cryptocurrency activities illegal in the country and vowed to crack down on all cryptocurrency activities within its boundaries yet again.
Huobi, a leading global cryptocurrency exchange, has revealed that it will no longer be opening accounts for Chinese users on the mainland amid the crypto crackdown in China. This follows the People’s Bank of China declaration that activities related to virtual currencies are illegal. The bank also took aim at the overseas exchanges dealing in crypto and providing cryptocurrency-related services to mainland China. After the bank’s declaration, Huobi said that it will gradually close accounts linked to mainland Chinese customers and expects the process to be completed by Dec 31, 2021.
Why the Crackdown in China
Historically China has had a love-hate relationship with cryptocurrency, particularly with Bitcoin. On Friday, the Chinese Central Bank declared cryptocurrency activities illegal in the country and vowed to crack down on all cryptocurrency activities within its boundaries yet again. In a Q&A section posted on the bank’s website, order matching, trading, issuance of derivatives and tokens for currencies (virtual) are not allowed. The People’s Bank of China (PBOC) added that such services are also prohibited in mainland China. The bank also noted that overseas virtual exchanges using the web to provide domestic clients with essential services is to be considered an illegal financial activity and any cryptocurrency exchange dealing in such will be investigated. The bank further added that its systems for monitoring cryptocurrency activities and catching people dealing with speculative investing have been improved. This is according to a CNBC translation sourced from the bank.
As expected, this announcement led to a Bitcoin price dip, and in 24 hours, the price of Bitcoin had tumbled by over 6.5% and was trading at around $41,880 on Friday, mid-morning. Also, Ethereum price dropped by 9% to roughly $2,865. Ethereum is the second-largest and successful digital asset, behind Bitcoin.
Besides the fall in prices for Ethereum and Bitcoin, stocks that heavily rely or are highly exposed to crypto also felt the heat. Data from Nasdaq showed that Coinbase stock was down by 2%, MicroStrategy slipped by 5% while Riot Blockchain fell by over 6%.
China’s Cryptocurrency History
This is not the first time China is taking a tough stance on cryptocurrency. At the beginning of the year, Beijing cracked down on cryptocurrency mining, an energy-intensive process that mint new currency units and verifies transactions. The ban prompted most miners to take their equipment offline leading to a sharp fall in the processing power of Bitcoin. This ultimately led to the infamous price dip for Bitcoin.
China’s crackdown on cryptocurrency comes just when Beijing is aiming to fulfill its environmental and climate targets. Being the world’s largest carbon emitter, Beijing has set a goal of becoming carbon neutral by 2060. PBOC is also keen on making way for its cryptocurrency, the digital Yuan, the most probable reason for the crackdown. In the meantime, Chinese mobile phone numbers can no longer be used to register accounts on Binance and also the Binance app is no longer available for download in China.