China announces ‘crackdown’ on Bitcoin mining and trading

Cryptos mentioned on lists of risks to financial system to be avoided

China has again signalled deep antipathy to cryptocurrency, this time calling for a crackdown on Bitcoin mining.

Last Friday the State Council Financial Stability and Development Committee, a body charged with managing risk in China’s financial system, issued a statement detailing its most recent meeting and conclusions about the most pressing risks it needs to manage.

After first mentioning less-specific issues such as building early warning systems to detect financial risks, and reforming smaller financial institutions, the statement said it’s time to “crack down on Bitcoin mining and trading behaviour” as the cryptocurrency and other risks mentioned could introduce external risks, or inflation, or both.

The Committee’s identification of Bitcoin as undesirable came just days after China’s Internet Finance Association, Banking Association, and the Payment and Clearing Association issued a joint statement banning banks from offering access to cryptocurrency investments, while web platforms were barred from hosting crypto companies’ operations or even ads for their wares.

The new statement didn’t specify what actions would be taken against Bitcoin operators, other than saying China will “severely punish” illegal activities. However, the impact of the ban is likely to be felt outside China, as the nation is one of the major sources of miners.

The Financial Stability and Development Committee’s statement is also notable because the risk mentioned before Bitcoin was “supervision of platform enterprises’ financial activities”.

That’s a reference to China’s ongoing restriction of financial services activities conducted by its local web giants. The most visible sign of China’s displeasure with financial forays by its web companies was the cancellation of Ant Group’s colossal IPO. Clearly the likes of Alibaba, Tencent, and Baidu aren’t going to be allowed to explore further financial services ventures without scrutiny.

Bitcoin took another dip after China's new announcement, taking its value down by more than 25 percent over the last seven days. Many other cryptocurrencies have followed suit. ®

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