(ATF) Three Chinese trade groups issued a statement underscoring limits on cryptocurrency services and the risks from crypto dealing on Tuesday May 18. The move mainly reinforced existing crypto limits in China but caused bitcoin volatility. It could be a precursor to further steps by China to develop a digital yuan.
The China Banking Association, the National Internet Finance Association of Chia, and the Payment and Clearing Association of China issued the joint statement.
It pointed out that China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.
Institutions, including banks and online payment channels, must not offer clients any service involving cryptocurrencies, such as registration, trading, clearing and settlement, the three industry bodies said.
“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,” they said in the statement.
China has banned crypto exchanges and initial coin offerings but has not barred individuals from holding cryptocurrencies.
The institutions must not provide savings, trust or pledging services for cryptocurrencies, nor issue financial products related to cryptocurrencies, the statement also said.
In highlighting the risks of trading cryptocurrencies, the trade groups added that they “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.
The core message in the statement – the ban on providing financial services for cryptocurrencies – was repeating announcements that had already been made in 2013, 2017 and 2019.
This caused online complaints from evangelists for crypto trading, who focused on headlines stating that China had banned dealing in their digital currencies of choice.
‘Anti-speculation law’
“China didn’t just ban crypto. It’s reiterating an anti-speculation law from years ago,” tweeted Qiao Wang, a promoter of crypto start-ups and co-founder of the DeFi Alliance that advocates for decentralised finance.
The price of bitcoin fell around 5% after reports of the statement emerged, but recovered later in the day.
The timing of the statement is likely to lead to speculation that China will soon announce further steps to develop the digital yuan, where the People’s Bank of China has taken a lead in promoting a central bank digital currency (CBDC).
The Bank of England is among central banks to predict recently that CBDCs will co-exist with private sector digital currencies, while seeking to promote goals such as financial inclusion.
China has suggested that the world’s central banks join together to promote common CBDC functionality.
But today’s statement may be a move to downgrade the importance of private digital currencies ahead of further marketing of a digital yuan.
# UPDATE: In Asian trading, bitcoin fell about 9% to as low as $38,940, slipping below a key 200-day moving average which left it down 40% from the year’s high of $64,895.22 on April 14.
Ether, the coin linked to the ethereum blockchain network, dropped about 15% to $2,875.36, Reuters reported just after midday in Tokyo.
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