China financial industry bodies namely, The National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China declared on Tuesday that financial and payment institutions must not conduct cryptocurrency-related businesses.
“Recently, cryptocurrency 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,” the bodies said in a joint statement as reported by Reuters.
China has banned cryptocurrency exchanges and initial coin offerings but has not barred individuals from holding cryptocurrencies. The institutions are instructed to not provide saving, trust or pledging services of cryptocurrency, nor issue financial products related to cryptocurrency, the statement also said.
The statement also highlighted the risks of cryptocurrency trading, stating “virtual currencies are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.
The trade associations also warned retail traders to be cautious of the risks involved in cryptocurrency investments while also calling on member institutions to abide by existing regulatory provisions regarding digital currencies.
China’s long stand against cryptocurrency should come as no surprise as the country banned token issuance and crypto trading back in 2017, which forced major exchanges to move their operations out of the country. This action has been followed by a host of often conflicting statements on crypto, with the government not being firm on its stance on cryptocurrency, stating that they support blockchain but not cryptocurrency.
What this means
This means that financial institutions operating in China cannot deal with or take on any transaction that involves cryptocurrency. This news may have little effect on the cryptocurrency space as a whole because similar regulation was given to institutions back in 2017.
Many regulators all over the world have been fighting back against cryptocurrencies, by imposing significant sanctions on operators in cryptocurrencies, this year especially. Countries like Nigeria, China and The United Kingdom have done the same.