Chinese officials have taken steps for months to crack down on cryptocurrencies, with mixed effects. Now they have tried to erase any doubts about their intentions.
In statements that were the most extreme and unequivocal so far, authorities on Friday said crypto transactions in China are banned and they will root out mining of digital assets. Almost immediately, the popular offshore exchange Huobi stopped allowing new users to register with a mainland China phone number and in a statement Sunday said it would “gradually retire existing mainland China user accounts” by December 31.
“While this is not a surprise as China has ‘banned’ crypto many times in the past, this time there is no ambiguity,” said Henri Arslanian, PwC crypto leader and partner, on Twitter. “Crypto transactions and crypto services of all kind are banned in China. No room for discussion. No grey area.”
The People’s Bank of China issued its missive along with nine other institutions, including the supreme court, the police and the internet and securities watchdogs, a signal that enforcement may come from all corners. It also closed the longstanding loophole that enabled citizens to maintain accounts with offshore exchanges such as Huobi, and forbid the platforms to hire locally for roles like marketing, tech and payment, limiting their ability to serve Chinese customers.
Regulators also specified that the stablecoin Tether, along with Bitcoin, Ether and other cryptocurrencies, is not fiat currency. It’s a new recognition of the role that stablecoins play in crypto-to-crypto trading, and a sign that regulators are newly interested in that activity, even though it may not affect the yuan directly.
Bitcoin fell by as much as 8.9 per cent after the news but stayed within its recent trading range and recovered some of the immediate losses over the weekend. Some crypto boosters noted that earlier attempts to ban cryptocurrencies have often preceded gains in bitcoin.
China’s top economic-planning agency asked local officials to investigate abnormal power usage, call in loans and eliminate preferential tax treatment to speed the shutdown of mining operations.
Many miners have already moved out of China, which had a 46 per cent share of the global hash rate, a measure of the computing power used in mining and processing, as of April, according to the Cambridge Bitcoin Electricity Consumption Index.