China’s Central Bank Issues Another Ban on Virtual Currencies

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In Brief
  • The People’s Bank of China (PBOC) issued a statement effectively banning any business related to cryptocurrencies.

  • In the announcement, the PBOC relates that the rise in virtual currency trading has disrupted economic and financial order.

  • In order to deal with the risks of virtual currency trading speculation, the PBOC issued a statement effectively making them illegal.

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The People’s Bank of China (PBOC) issued a statement effectively banning any business related to cryptocurrencies.

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In the announcement, the PBOC relates that the rise in virtual currency trading has disrupted economic and financial order. The central banks said it has also led to the spread of illegal and criminal activities. According to the PBOC these crimes, such as gambling, illegal fund-raising, fraud, pyramid schemes, and money laundering, seriously endanger the safety of people’s property. 

In order to deal with the risks of virtual currency trading speculation, the PBOC issued a statement addressing them.

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PBOC’s crypto ban

The first point the Chinese monetary authority made was to establish that “virtual currency does not have the same legal status as legal currency.” Therefore, according to the PBOC, “virtual currency-related business activities are illegal financial activities.”

The announcement further details the activities that are now prohibited under this issue. For instance, any kind of exchange involving virtual currencies is now prohibited. This includes exchange between legal and virtual currency, exchange between virtual currencies, or trading virtual currencies as a central counterparty. Overseas exchanges, providing their services to Chinese residents, the PBOC also considers “an illegal financial activity.”

Additionally, providing intermediary information and pricing services for virtual currency transactions, is also illegal. This is the case for token issuance financing, virtual currency derivatives transactions “and other virtual currency related business activities.” 

The announcement also featured how Chinese authorities intend to facilitate the prohibition on cryptocurrencies, such as coordinating departments and strengthening enforcement. The state also intends to bolster its risk monitoring and early warning of virtual currency trading speculation.

However, commentators on social media remarked how similar this announcement looked to one posted by the PBOC on September 3. “Don’t fall for it,” one user said. “This is the 10th or 11th time China is banning crypto. Nothing new.”

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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