China’s comprehensive cryptocurrency crackdown

Bitcoin, the world’s most popular cryptocurrency, will become legal tender in El Salvador in September 2020, ushering in a new era for the country’s crypto-tech industry. The happiness, on the other hand, was fleeting. Top-down measures implemented on the other side of the Pacific later that month sent shockwaves through the crypto system.

On September 24th, Chinese authorities issued two notices regarding the cryptocurrency industry. According to a document published on the NDRC’s website, the goal is to eliminate the upstream and downstream activities associated with cryptocurrency mining. According to the document, cryptocurrency’s contribution to China’s national economy is low, despite its high energy consumption, as outlined by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era’s concept of ecological civilisation.

 To combat any mining activity

It proposed central coordination, provincial responsibility, and implementation at the city and county levels. As a result, no financial assistance from local government units, banks, or other financial institutions is possible. This order required all financial institutions and non-bank payment institutions to recover all previously issued loans. Along with urging investigators to dig deeper into the preliminary work of cryptocurrency mining operations by keeping a close eye on and analysing anomalous electricity consumption, the notification urges them to expedite the orderly shutdown of current mining operations. Mining centres that also serve as data centres have been addressed, with the request that a distinction be made between mining and other industries such as blockchain, big data, cloud computing, and so on, and that credit supervision for data centre companies be strengthened as a result.

Another piece of writing focused on cryptocurrency exchange. Beijing has stated once again that cryptocurrencies are not legal tender. As a result, cryptocurrency-related business activities are prohibited, including cryptocurrency exchanges located outside of China providing services to Chinese citizens via the internet. 

As a result, it has asked that provincial governments revamp local monitoring and early warning mechanisms, as well as combine online and offline investigation, to improve the accuracy and efficiency with which inflated cryptocurrency activities can be identified and discovered. It announced departmental coordination to address the risks of hyped crypto-trading and to strengthen territorial implementation. Financial institutions and non-bank payment institutions are expressly prohibited from providing account opening, fund transfer, clearing, and settlement services for cryptocurrency-related business activities.

 Internet service providers cannot offer services such as online business premises, commercial display, marketing promotion, and paid diversion for cryptocurrency-related business activities.

Cryptocurrencies fell in value after China announced new rules governing the digital asset class (cryptocurrencies). According to CoinMarketCap data, Bitcoin fell by 9% within three hours of the announcement. Following the notification, Huobi, one of the many overseas exchanges that cater to Chinese residents, announced that it would cease providing services to mainland Chinese users as soon as possible. “Chinese crypto traders may shift to decentralised finance or decentralised finance (DeFi) platforms—blockchain-based organisations that can provide multiple services and are not nominally controlled by any single party or company,” crypto enthusiasts predict.

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