China’s New Regulations Crack Down On Crypto Currency Fever

For On June 21, the Central Bank (PBC) announced that the relevant departments of the Central Bank recently discussed with main banks and payment institutions in China including the Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank, Postal Savings Bank of China, and Alipay (China) Network Technology Co., Ltd regarding the provision of services for crypto token transactions.

The PBC pointed out that the speculative trading of crypto currencies will disrupt the normal functioning of the economy and the financial market. It will give rise to risks of illegal and criminal activities such as illegal cross-border transfer of assets and money laundering, and seriously infringe the property safety of the public. Banks and payment institutions are to strictly follow regulatory requirements in the Notice on Guarding Against the Bitcoin Risks, the Announcement on Preventing Financing Risks Related to Token Offerings, etc. They are required to fulfill their obligations of client identification, and not to provide products or services regarding account opening, registration, transaction, clearing and settlement for related activities. They are required to screen accounts opened with them and identify those of virtual currency exchanges or over-the-counter (OTC) dealers, and cut off their payment channels for trading funds.

“The speculative trading of crypto currencies will disrupt the normal functioning of the economy and the financial market”

As soon as the news came out, the crypto token plunged. Bitcoin’s intraday decline was close to 10%, and the 24-hour lowest price was about 31,562 US dollars per coin. Ethereum once fell by more than 10%, falling below 1,900 US dollars per coin.

On the evening of June 22, Bitcoin continued its downward trend and broke below the $30,000 mark at 8:25 in the evening, setting a new low since January 28.

Cryptocurrency Prices by Coinlib

A series of regulatory limit due to economic risks and energy efficiency.

This round of regulatory turmoil can be traced back to May 21, when the Financial Stability and Development Committee of the State Council convened a meeting, which mentioned “combating Bitcoin mining and trading activities and resolutely preventing the transmission of individual risks to the society”.

In the following month, Inner Mongolia, Sichuan and other places issued documents banning mining. The government requires the State Grid (the main operator of China’s power facilities) to cooperate to complete the shutdown of crypto token mines before June 20.

Voices from banks and payment institutions: say No to crypto currencies’ transaction

After the notice of the central bank, relevant institutions have issued announcements to draw a clear line toward crypto currencies.

China Construction Bank stated that it will not carry out or participate in any business activities related to crypto currencies, and will not provide any financial products and services such as account opening, registration, trading, clearing, and settlement for crypto currencies;

ICBC reiterates that any institution and Individuals are not allowed to use its bank accounts, products, services, and channels to conduct token issuance financing and crypto token transactions.

Alipay also responded that it will continue to strictly monitor and investigate transactions involving crypto currencies, and establish inspection systems for key websites and accounts to further increase its crackdown on related transactions.

The effect of the announcements of payment institutions was immediate. On June 21st, a crypto token investor said on social media: “Today I used Alipay to transfer 2 consecutive sums of money without success. Alipay can’t be used, and it’s hard to buy coins later.”

Another practitioner in the currency circle said: “Now many projects will be closed and the crypto currency market has changed from bull to bear. Banks can track every fund in each account, whether it is buying or selling (crypto token). In the past, the account was closed after a few basic traces. Now that the bank has strengthened its monitoring, users are even more afraid to make transactions.”

However, there are still difficulties in monitoring crypto token transactions from a technical perspective. On the one hand, over-the-counter (OTC) transactions in the crypto currency market are difficult to monitor; on the other hand, if crypto currencies cannot be sold in RMB, they can also be sold directly into U.S. dollars. , And then exchange currency through the bank to exchange for RMB, you only need to hold an overseas bank card.

Mining activity shutdown

Compared with crypto token investors, the current round of regulation has obviously hit harder on mining.

Compared with transactions business, mining machines and mining farms are of heavy assets business mode. Short-term market fluctuations will directly affect their income. If the cash flow cannot be supported, they may go bankrupt.

The biggest consumption of mining is electricity bills. Whoever can get lower-cost electricity can get higher profits. Therefore, Chinese mining is mainly deployed in remote areas such as Sichuan and Inner Mongolia. The current regulation turmoil of banning crypto token mining can be described as a “precise strike.”

The shutdown came as scheduled. On June 20th, all Bitcoin and other crypto token mining machines in Sichuan were collectively powered off. On the previous day, the hash rate of Bitcoin’s entire network continued to decline significantly. On June 22, BTC data showed that the hash rate of Bitcoin’s entire network was 114.38EH/s, which was down from the historical peak of 181EH/s on May 13 this year.

As reported by Reuters, Bitcoin’s six-week run of outflows has been driven by the combination of environmental concerns and an increasingly antagonistic regulatory environment in China, – said Matt Weller, global head of market research at Forex.com. With these themes still in effect and prices subdued, it may be a while before we start to see another period of sustained fund inflows.

“Bitcoin’s six-week run of outflows has been driven by the combination of environmental concerns and an increasingly antagonistic regulatory environment in China. With these themes still in effect and prices subdued, it may be a while before we start to see another period of sustained fund inflows”

With the strict regulation limit, the big miners choose to move directly abroad. At present, 65% of the computing power may be transferred. The first choice is to migrate to Central Asia and North America where electricity costs are relatively low.

The possibility of a complete blockade of Bitcoin in the United States is very small, and more is to strengthen supervision and taxation.

Compared with the strengthening of Chinese supervision, the oral and related measures of major international central banks appear to be somewhat minor. The 2021 regulatory agenda recently released by the US Securities and Exchange Commission (SEC) shows that in this year’s list of regulatory priorities, specific tokens such as cryptocurrency, blockchain, bitcoin and ether are not included. At the same time, the Bank of New York Mellon, Goldman Sachs, etc. are expanding services such as bitcoin custody, while utility companies are attracting miners to natural gas power plants in northern New York or solar power plants in Texas.