The Chinese government has announced that it will be cracking down on financial institutions that get involved in the cryptocurrency business, while also warning investors about the speculative nature of crypto trading.
The ban will prevent banks and other financial platforms from offering their clients any service related to cryptocurrency, including but not limited to their trading, clearing, and use.
The move is a continuation of China’s decision to shut down local crypto exchanges in 2017 in which would be one of the biggest blows to the crypto market.
Two years later in 2019, the People’s Bank of China also announced that it would be blocking access to all cryptocurrency exchanges and Initial Coin Offerings (ICO) platforms by taking advantage of the country’s advanced regulations on internet access.
These controls have been seen as a violation of human rights by critics of the Chinese Communist Party (CCP).
The statement was issued by the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China, 3 of the country’s most important financial bodies.
Each of these bodies has been authorized by Chinese regulatory agencies to oversee all of their respective industry’s regulations, making their statement more than a simple recommendation to industry members.
The reasoning behind the ban was the high volatility of the crypto market, as well as the lack of “real support value” and “extremely easily” manipulable prices of digital assets.
China has been a huge influence on the crypto markets at times, and many of the largest crypto exchanges can trace their roots to Chinese development teams.
Increase In Crypto Regulations Is Becoming a Global Trend
China’s decision to reiterate the ban on cryptocurrency for the financial sector is not an isolated incident in the global state, as concerns around the increasing popularity of cryptocurrency have been at the forefront of multiple government’s attention.
Back in February of 2021, an official bulletin published by the Indian Parliament suggested that the country could be considering introducing legislation that would prohibit all private cryptocurrencies.
The Indian government’s decision to consider a ban of cryptocurrencies was the result of its efforts to explore the creation of a Central Bank Digital Currency, which would be a digital version of the Rupee powered by the underlying technology common to all crypto: blockchain.
Earlier this month, Turkey’s central bank banned the use of crypto for the purchase of goods and services in the country, citing that crypto was “neither subject to any regulation and supervision mechanisms nor a central regulatory authority,” and therefore it causes “irreparable” damage.
The United States Also Have its Eyes Set On Crypto
The recently-assigned Acting Comptroller of the Currency, Michael Hsu, ordered the review of all actions recently taken by the agency via a statement released before the Committee of Financial Services on May 19th.
The review would include all crypto-related guidances issued over the past year, with the reasoning behind it being concerns over the initiative’s lack of coordination with stakeholders.
Hsu referred to the OCC’s commitment to ensuring banks remain safe for costumers while also allowing innovation to thrive by stating:
“At the OCC, the focus has been on encouraging responsible innovation,” Hsu said. “For instance, we created an Office of Innovation, updated the framework for chartering national banks and trust companies, and interpreted crypto custody services as part of the business of banking. I have asked staff to review these actions.”
While the OCC issued guidance that would allow banks to issue their stablecoins, which was considered a big win for the crypto market, the stance that Hsu’s administration will take regarding crypto assets is still to be seen.
The regulation of cryptocurrencies poses specific challenges to governments, as cryptos don’t exist in the same way that many other forms of technology do. As a global network, a ban, even in a major nation, does little to impact the functionality of the system as a whole.