China Dampens Blockchain Fever with Crypto Trading Crackdown
- China really doesn’t like cryptocurrency as it once again embarks on a crackdown of digital asset trading.
- On the other hand, blockchain technology still sits well with the state, as the country’s leaders try and steer the industry towards adoption.
Chinese president Xi Jinping welcomes guests at the G20 summit in Hangzhou, China on September 4. 2016. Shutterstock
In September 2017, China issued an effective ban on cryptocurrency exchanges and trading platforms and more than 200 blockchain-based platforms have closed down since then. Recently there has been a fresh wave of actions, cracking down on ICOs and cryptocurrency trading in the country.
The local governments of several major cities, including Beijing, Shanghai, and Shenzhen, launched a campaign warning their citizens of “illegal fundraising”, fraudulent behavior and pyramid schemes.
Actions were taken by the National Internet Finance Association and the Computer Network Emergency Response Center towards cutting down online activity related to offshore cryptocurrency trading.
These efforts come right after President Xi Jinping raised attention around the usage of blockchain technology last month. The Chinese leader said that the world’s second-biggest economy should accelerate its developments in the field, which was a cause for optimism among the cryptocurrency community.
Following this news the price of bitcoin, the most well-adopted blockchain-based technology, increased by almost 40% to over $10,000, but the recent actions of the Chinese government have caused a drop in the price by about 30%.
The People’s Bank of China issued a statement on Friday, warning of the speculation with cryptocurrencies since blockchain technology was introduced. It blamed it for causing a “severely disrupted economic and financial order”.
“Investors must not treat virtual currencies the same as blockchain technology. The issuance and trading of virtual currency contain multiple risks, including fictitious assets, operation failure, and speculation,” it added.
The targets of the crackdown include both local and overseas trading platforms for cryptocurrencies. Thirty-nine Chinese businesses are being investigated for activities with virtual currencies.
Multiple people were detained by the police in Beijing in relation to a fraud case involving the platform BISS. No other details were publicly disclosed, because of the ongoing investigation.
China banned onshore cryptocurrency trading in September 2017, calling it a threat to financial stability, as part of the country’s de-risking campaign, which has also targeted peer-to-peer online lending platforms.
After the ban of September 2017, the Chinese government proclaimed cryptocurrency trading, along with P2P online lenders, as risks for the financial stability of the country.
As a result, six Chinese cryptocurrency platforms were closed as well as more than 200 others, which were linked to servers outside of China. Almost 10,000 payment accounts were shut down, according to China Securities Journal.
“Such activities are not really based on blockchain technology, but use the concept to illegally raise funds, conduct pyramid selling or fraud,” the state-run newspaper said.
- The head of China’s central bank digital currency institute said the e-CNY has undergone a major upgrade, and should be made available as an option in all retail scenarios.
- The PBOC official noted that platforms can integrate the CBDC in the short term using QR codes, and focus on upgrading their payment tools in the long run.
Office building of the People’s Bank of China. Flickr
- The team behind Multichain confirmed that their CEO was detained in China on 21 May, and that all of his electronic devices were confiscated by the local police.
- The CEO’s sister moved the project’s remaining funds to wallets under her control on 9 July, and several days later was also detained by the police, leaving the team with no funds.
- A new 13-count superseding indictment has accused Sam Bankman Fried of bribing one or more Chinese officials in order to unfreeze accounts connected to Alameda.
- In early 2021, Chinese authorities froze certain Alameda accounts on two of China’s largest crypto exchanges”, which reportedly held more than $1 billion worth of crypto assets.