The crypto market experienced yet another day of “reds” as China’s annual crypto ban surfaces. This isn’t the first crypto ban in China, but we can certainly describe this as the most direct and comprehensive regulatory framework involving the highest number of ministries in the history of crypto market regulation in China. The recent crypto regulation resulted from crypto being a proposed threat to the local currency, Yuan, the energy-intensive computing process when mining, and a threat to the country’s economic and financial order.
Going down the history lane of China’s crypto regulation, in late 2017, a series of early governmental crackdowns precipitated a roughly 80% decline in cryptocurrency values and a subsequent years-long bear market. Several governments, including South Korea, began cracking down on ICOs, the then-popular Crowdfunding method used to collect money by minting new coins. A ban on cryptocurrency transactions was implemented in China in the same year, with financial institutions prohibited from providing trading, settlement, or insurance services to virtual-currency companies in any way.
The Chinese government reaffirmed these restrictions on Friday. Ten agencies, which include the central bank of China and foreign exchange regulators, were all involved. The People’s Bank of China (PBOC) announced that crypto must not be circulated and that foreign exchanges are prohibited from offering services to Chinese investors. It also prohibited the facilitation of national cryptocurrency trade by banking institutions, payment businesses, and internet corporations.
Despite the initial shock, experts said they did not anticipate the crackdown to have a long-term negative impact on the price of global crypto-assets since businesses continue to use crypto products and services.