People’s Bank of China (PBOC) issued fresh guidelines to eliminate all forms of crypto use in mainland China. The Chinese Central Bank deemed all crypto-related transactions illegal and ordered authorities to take strict action against existing crypto mining farms in the country. It also prohibited any foreign crypto exchanges from offering services in the country.
China Central Bank Says Overseas Cryptocurrency Exchanges Must Not Provide Services To Mainland Investors
China Central Bank Says Cryptocurrency-related Activities Are Illegal
— *Walter Bloomberg (@DeItaone) September 24, 2021
The fresh nationwide crypto ban has led to a sharp decline in cryptocurrency prices including Bitcoin ($BTC), Ethereum ($ETH), and several others. While the crypto enthusiasts were not really shocked by the move given China has banned Bitcoin and other crypto assets on a number of occasions in the past. However, market insiders believe the latest set of guidelines are different from previous similar crackdowns as it came from the national bank itself.
Let’s look at five critical points in the newly released crypto crackdown guidelines that are different than any other previous crackdowns,
1. Classify Crypto Mining as Eliminated Industries:
The current set of crypto crackdown guidelines deems crypto mining as an eliminated industry, which would lead to surplus electricity charges for crypto mining operations. China had put crypto mining under the “elimination category” back in 2019 as well but was removed soon after.
2. First Clear Mention of Bitcoin, Ethereum, and Tether
The latest regulatory guidelines notably mention Bitcoin, Ethereum, and USDT for the first time. Earlier, crypto-assets were collectively referred to as virtual assets. the Deputy Governor of the People’s Bank of China Fan Yifei took special exception to the stablecoin use claiming it could lead to failure of the existing monetary system.
3. First Centralized Crypto Ban Order
Prior to the latest crypto crackdown guidelines from the central bank, most of the early crackdown activities were carried out by state and provincial authorities. Despite a centralized oversight, no other previous regulatory action was directly issued by the central ban beyond cautionary warnings. This time around the Supreme Court, the Supreme Procuratorate, the Ministry of Public Security, and the Administration of Foreign Exchange have come together to ensure a complete ban on crypto-related activities.
4. Domestic Companies to be Held Responsible For Aiding Foreign Entities
The current set of guidelines also put great risks for the local business and technology solution providers who would be held accountable if found dealing with companies associated with crypto trading. The official document read,
“the provision of services by overseas virtual currency exchanges to domestic residents of my country via the Internet is also illegal financial activity. For the domestic staff of relevant overseas virtual currency exchanges, as well as those who know or should know that they are engaged in virtual currency-related business, they are still illegal financial activities. Legal persons, unincorporated organizations and natural persons that provide services such as marketing promotion, payment, and settlement, and technical support shall be held accountable in accordance with the law.”
5. Government Won’t Protect People Incurring Losses Due to Crypto
The guidelines made it clear that there are no “ifs & Buts” around the legality of cryptocurrencies. Any person involved in crypto trading activities violating a public order won’t qualify for any civil legal actions. It means the government won’t come to the rescue of the citizen.
The real nature of the latest crypto crackdown can be determined by how crypto exchange giants such as Huobi, OKEx, and Binance react to the latest regulatory guidelines since the majority of Chinese traders make use of these exchanges.