It seems China has been taking the crackdown on Bitcoin and other cryptocurrencies quite seriously. After banning financial institutions from providing cryptocurrency services last month and cracking down on Bitcoin mining, the People’s Bank of China (PBoC) has summoned domestic banks and mobile payment services regarding crypto trading. The banks that were in the meeting include the Agricultural Bank of China (ABC), Construction Bank of China (CBC), Industrial and Commercial Bank of China (ICBC), and Postal Savings Bank of China, among others, as well as mobile payments app Alipay.
The central bank highlighted how speculative trading for cryptocurrencies is disrupting the financial system in the country. It stated that it’s also creating a risk of money being laundered across the border.
Worth noting, however, that PBoC didn’t announce a new rule as such. It just reiterated the 2017’s banking ban where financial institutions shouldn’t provide banking and settlement services for crypto transactions. It did add that banks should also check if any OTC (over the counter) traders are providing the option to traders for crypto-to-fiat conversion and vice versa. In such a case, “the institutions should immediately cut off their payment and funding channels,” the central bank stated.
In the meeting, it sternly said that banks should improve their algorithms to identify crypto-related transactions. Unsurprisingly, after the meeting, banks have released a statement that if the users are found dealing with cryptocurrencies, then not only the accounts will get terminated, but they will also be reported to the relevant authorities.
In many ways, the bank’s statements aren’t different from the ones sent out before. But if you read between the lines, it’s evident that banks will now proactively close the accounts of users if they are doing crypto transactions. While many crypto exchanges already have crypto-to-crypto transactions only since the ban issued in 2017, Chinese traders have used OTC merchants to convert fiat to crypto. But with the latest directive, China is seemingly cutting the funding methods of allowing the Chinese Yuan to flow into the crypto markets.
It’s interesting to see China taking such a hard stance when countries like El Salvador are embracing Bitcoin. But it might just be a way for China to assert its significance with the launch of centralized crypto in the form of Digital Yuan.