China all but bans cryptocurrencies

Banks told not to transact, web platforms blocked from hosting or advertising, citizens told to look elsewhere for investments

Beijing has all but banned cryptocurrencies.

In an edict published yesterday by three bodies – the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China – banks are forbidden to allow their customers access to cryptocurrency trading or storage, and told not to provide insurance to cryptocurrency businesses or investments.

Web platforms were told not to host crypto-coin companies, or even allow ads for any crypto-related business activities.

The edict also advised citizens that cryptocurrency has no inherent value and can be manipulated, making it a poor investment. The three government agencies also warned that crypto-coin investments put personal information at risk.

The new rules follow a 2019 People's Bank of China decision to block access to all cryptocurrency exchanges and initial coin offering services. China has also discouraged cryptocurrency mining operations.

But the nation is bullish on blockchain. In 2019 President Xi Jinping gave a speech in which he heaped praise on blockchain technology, and called for its adoption to improve the efficiency of China’s economy.

China has lately cracked down on lending practices it feels create opportunities for speculation and/or introduce risk to its financial system. This latest directive paints a picture of cryptocurrencies as unstable and driven by whims, so the ban accords with Beijing’s desire for stability.

And then there’s the Digital Yuan, China’s own fiat digital currency, which is being used in increasingly high-profile and high-scale tests. The Digital Yuan will also make it possible to track transactions, while ungoverned digital currencies retain some promise of relative anonymity.

Bitcoin’s price has dropped around 1.5 per cent in the last 24 hours. ®