It has been widely reported that Chinese authorities aiming to completely ban centralized trading of virtual currencies as well as individuals and businesses that provide related services. That seems to be more headline than fact.
The report was based on an internal memo from a government meeting seen by Reuters, that actually stated Beijing will continue to apply pressure to the virtual currency trade and prevent the growth of risks in that market. That is not even a proposed ban, what they appear to be seeking in proper Anti-Money Laundering and reporting.
National and local authorities should ban venues that provide centralized trading of digital currencies, including bitcoin as the biggest one, Vice Governor of the People’s Bank of China (PBOC) Pan Gongsheng has said, but he himself has no power to do so and is not seen as a political heavyweight.
Regulators need to ban individuals or institutions that provide market-making activities, guarantees, or settlement services for centralized trading of the currencies, such as online “wallet” service providers, he said.
“The financial work conference clearly called for limiting ‘innovations’ that deviate from the need of the real economy and escape regulation,” Pan said, referring to last week’s meeting.
He added that the authorities should block domestic and foreign websites, close mobile apps that provide centralized virtual currency trading services to Chinese users, and sanction platforms that provide cryptocurrency payment services. He also called for local authorities to investigate services that help people move funds overseas.
Once a global hub for bitcoin trading and mining, China accounted for more than two-thirds of the world’s bitcoin-mining operations. Recently, however, Chinese regulators started cracking down on virtual currencies, explaining it as a fight with capital outflow. They claimed the trade in cryptocurrencies was being used by Chinese citizens to move cash abroad.
China is full of Bitcoin, Ethereum and Ripple, any ban even if imposed will not be effective, it will change the process but the process will continue.
Last year, regulators banned initial coin offerings, shut down local cryptocurrency trading exchanges, and limited bitcoin mining.
According to Pan, the authorities should continue that practice. He proposed regulations around electricity prices, land use, tax, and environmental protection to guide businesses involved in such activities “toward an orderly exit.”
“Pseudo-financial innovations that have no relationship with the real economy should not be supported,” the banker said.
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