China Bans Financial Institutions From Participating in Crypto Services

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In Brief
  • China pivots from last months acceptance of bitcoin.

  • Move comes as Chinese ramp up digital yuan offering.

  • This move comes while China is testing its own central bank digital currency.

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Under this ban, no banks or online payments channels are permitted to offer clients any services involving cryptocurrency. This represents a deviation from last month’s announcement by the People’s Bank of China (PBoC) that bitcoin (BTC) was an “investment alternative.”

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On April 18, the Chinese central bank appeared to be changing their attitude towards digital currencies. Remarks made by the deputy governor of the PBoC Li Bo seemed to show a move towards accepting bitcoin and cryptocurrencies.

This was a shift from China’s more traditionally combative approach to cryptocurrency trading and exchanges. Back in 2017, China banned initial coin offerings and cracked down on exchanges and trading platforms. However, this wasn’t representative of the full story.

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China has historically been one of the largest buyers of bitcoin. In 2020, it was among the top five countries with the largest bitcoin investments.

Latest developments

However, today’s latest development shows a pivot away from accepting cryptocurrency en masse in the country. With the joint statement reading:

“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.” 

While exchanges and initial coin offerings are barred, individuals in China are still permitted to hold cryptocurrencies. The institutions must not offer any saving, trust or pledging services of cryptocurrency, nor are they allowed to issue financial products related to cryptocurrency.

This move comes while China is testing its own central bank digital currency, the digital yuan.

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Adam is working in London while studying for a self-paced MicroMasters in Data, Economics and Public Development online with MITx. Before this he studied at Trinity College Dublin where he first became interested in cryptocurrency and blockchain. First writing for a university publication on cryptocurrency in 2015, Adam has been writing about and following the crypto economy ever since.

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