China Preparing Cryptocurrency Ban
Ashley Allen / 1 year ago
Following China’s ban on initial coin offerings of cryptocurrencies, the Asian country looks set to ban all digital currencies by the end of September. In fact, leaked documents obtained by Reuters show that the Chinese government is ordering cryptocurrency exchanges to close. In fact, a number of Chinese Bitcoin exchanges are already closing. However, the Chinese government is considering creating its own cryptocurrency.
5/ BTCChina encourages customers to withdraw their funds as quickly as possible. Customers can withdraw their funds whenever they want.
— BTCC (@YourBTCC) September 15, 2017
China’s Cryptocurrency Ban
China operates very strict controls on money flowing out of the country. However, traders are using cryptocurrencies to circumvent financial regulations. In response, China is outlawing cryptocurrency transactions within its borders. However, the idea of a state-run digital currency is under consideration. Reuters reports:
Li Lihui, a senior official at the National Internet Finance Association of China and a former president of the Bank of China, told a conference in Shanghai that global regulators should work together to supervise cryptocurrencies.
“Digital tokens like bitcoin, ethereum that are stateless, do not have sovereign endorsement, a qualified issuing body or a country’s trust, are not legal currencies and should not be spoken of as digital currencies,” he said. “They can become a tool for illegal fund flows and investment deals.”
He said there should be a distinction between digital currencies, which were being studied and developed by authorities such as the Chinese central bank, and digital tokens such as bitcoin. Digital currencies developed by authorities could be used for good, with the right regulation, he said.
A Chinese government source verified Reuters’ report. Following the news, Bitcoin price dropped by 5%.
What Does This Mean for Cryptocurrencies?
It’s a big deal. Cryptocurrency mining in China is huge, and traders rely heavily on blockchain transactions. Beijing itself even hosts the OkCoin and Huobi exchanges, both of which are closing trading at the end of October. China’s ban on such activities will have a massive impact on blockchain transactions. In fact, such strict control on cryptocurrencies could even spread to other countries. China is already calling on international governments to exert more control over blockchains. China’s Li Lihui considers cryptocurrencies illegal since the trading tokens are “stateless”.
A US ban on blockchain transactions is unlikely. The Securities and Exchange Commission, though, already expressed concern over illegal stock offerings. Indeed, the SEC could use the move as motivation to scrutinise cryptocurrency exchanges more closely. However, US regulators officially accepted Bitcoin as a currency in 2013.