China is tightening measures against digital currencies. The authorities have outlawed nearly every aspect of cryptocurrency trading, and the People's Bank of China (PBoC), together with the National Development and Reform Commission (NDRC), has published several documents related to the new bans. Against this background, the market flushed sharply.
The excitement around the new asset class categorically does not suit the government of the country, since it violates both the financial and economic order within it. Cryptocurrencies are closely intertwined with fraud, criminal activity, pyramid schemes, gambling, and money laundering, which threaten the safety of millions of citizens.
Therefore, in order to prevent and combat the risks of speculation associated with trading digital currencies, as well as maintain national security, a set of rules has been developed that prohibit:
- Business activities related to cryptocurrencies, which from now on will be classified as illegal, including exchange of crypto assets, their sale and purchase, financing and issuance of tokens, transactions with derivatives, and all other types of financial transactions in which digital currencies appear
- The provision of services for the exchange of cryptocurrencies to residents of China on the Internet will also be regarded as illegal activity, which means that the fate of foreign cryptocurrency exchanges and their employees in branches in the country is now in question
To improve the situation and control the risks, 10 Chinese departments have formed a “coordination mechanism”. Its purpose is to prevent any financial activity involving digital currencies. In parallel, the authorities announced the completion of improvements to crypto monitoring platforms for the rapid detection of illegal transactions with crypto assets.
The Financial Cybersecurity and Information Administration, as well as the telecommunications industry and China's market surveillance departments, are now connected to the monitoring. Their cooperation, according to the authorities, will directly assist in shutting down any payment channels and removing websites and mobile applications that disrupt the market and violate the law.
The document states that territorial responsibility will be implemented. In other words, the financial regulators of each province take full control of following the new rules and discouraging any illegal financial activity, preventing speculation, and maintaining the economic order in the region.
We will remind that earlier China introduced a ban on mining, because of which dozens of firms closed local divisions, and miners had to look for a new place to allocate capacities. Among the most preferred territories were North America and Kazakhstan.
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