Friday, October 22, 2021

China says it will shut down all crypto-currency trading

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Image copyright Xinhua Image caption China said there are 13.3m people holding “illegal” accounts on the country’s exchanges

The state news agency Xinhua says all crypto-currency trading by citizens of China is illegal.

It said trading in all currencies “breaks the law” and committed financial crimes.

The announcement is a blow to China’s ambitions to do the same in the rest of the world.

The surge in the popularity of virtual currencies has raised concerns that such platforms could become major money laundering tools.

“All crypto-currency platforms in China break the law because doing so turns the crypto-currency system into an asset of monetary policy,” Xinhua reported, citing central bank and tax officials.

“Therefore transactions are illegal and can be punished as financial crimes.”

Crypto-currency, in simplest terms, is a digital medium of exchange, allowing transactions between private individuals to be settled without banks, governments or central banks.

It has been gaining in popularity as a medium of exchange, especially in China and Russia, but it is not immune to counterfeiting, fraud and market manipulation.

It is expected to grow even more rapidly as both regulators and public perception evolve about the sector.

Image copyright Getty Images Image caption Bitcoin rises in value on crypto markets – but is it used in illegal ways?

Xinhua’s announcement comes on the same day Chinese regulators formally announced their plans to shut down 12 virtual currency exchanges.

The crackdown was in response to the rapid growth of virtual currencies, it said.

Nearly 700,000 Chinese have “illegal” accounts on the country’s exchanges, the agency said.

The 12 exchanges, which are all based in Beijing, will be ordered to stop operations on July 1.

China already has laws prohibiting the use of virtual currencies such as bitcoin to launder money and is considered one of the world’s key venues for trading such currencies.

But it took only a few weeks for China to ban virtual currency trading inside its borders – a move that rattled the bitcoin market, causing some of the market’s largest players to leave.

At the peak of trading in January, the government’s hardening stance on the cryptocurrency market in China had already started to pressure the market.

Since then, the price of bitcoin and other cryptocurrency has fallen by nearly 60% in China.

Earlier this month, it emerged that the owner of China’s largest bitcoin exchange had been banned from running any Chinese bitcoin trading platform.

On Monday, two bitcoin exchanges in China said they were closing for “commercial reasons”, Xinhua reported.

Kearn Ke, a bitcoin expert at blockchain company, Maltz, said he expected the second shutdowns “to have a cascading effect” as some of China’s largest bitcoin exchanges were in the process of shutting down.

Over-the-counter trading has been suspended in China, meaning that most potential traders in China will now have to go through official exchanges.

However, outside of China, the industry appears unregulated – and untracked.

Following China’s clampdown on coin trading, eight currencies listed by Coinmarketcap.com now have less than 50 cryptocurrencies in circulation.

For comparison, South Korea’s top trading currency – Bitcoin – has 1.6 million globally.

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