Following a week that has seen the price of Bitcoin drop to a low of $38,500, China has set forth a number of steps to effectively ban financial institutions and payment companies from providing any service relating to cryptocurrency transactions.
In a joint statement by three industry bodies; the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China, the 14 week low for Bitcoin was brought up as a factor that justified the ban:
“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order”
China does not recognise cryptocurrency as legal tender, and in September 2017 China banned Initial Coin Offerings (ICO’s) as well as prohibiting cryptocurrency trading platforms from offering fiat/crypto conversion features. This has led to a number of trading platforms and exchanges shutting down, and moving offshore. China has now further extended its existing ban to banks and payment companies, banning any saving, trust or pledging services of cryptocurrency.
Following the latest cryptocurrency bull run China’s participation in cryptocurrency has rebounded, largely fueled by oversea exchanges such as Huobi and OKEx. Prior to the latest crackdown on cryptocurrency, exchanges that cater to Chinese traders, including Binance and MXC enabled individuals to open accounts and convert crypto to fiat in a number of ways.
As a result of the enhanced crypto ban, it will be harder for chinese individuals to buy cryptocurrency, and it will also impact china-focused exchanges who will have to find a way around the limitations, if they are able to.
Hong Kong's Bitcoin Association responded to the latest ban in a tongue in cheek tweet:
"For those new to bitcoin, it is customary for the People's Bank of China to ban bitcoin at least once in a bull cycle."
While individuals are still not banned from holding cryptocurrencies, the chinese market (which had in 2017 accounted for 90% of the global cryptocurrency market) as well as the global market is likely to be impacted by the recent events.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.