Bitcoin and crypto transactions ban in China?
Last week, news emerged of China banning companies involved with Bitcoin and other cryptocurrencies. In a week with so much going on, this made things even more volatile. In this blog, we’ll look at what restrictions were placed by which Chinese bodies and what it means for the country’s crypto companies.
Restrictions, no Bitcoin ban
China did not “ban” Bitcoin companies outright. They did place “some” restrictions on cryptocurrency companies. But these are directives, and in no way are orders which will, or have already been implemented.
Three financial institutions under the Chinese government – The National Internet Finance Association of China (NIFA), the China Banking Association (CBA), and the Payment and Clearing Association of China (PCAC), issued a joint statement telling their member companies not to engage with companies in the cryptocurrency industry.
Here’s what the statement said,
“Financial and payment member institutions shall not provide insurance services that relate to virtual currencies or directly and indirectly offer crypto-related services for their clients, including but not exclusive to: crypto-related trading, custody, lending, and settlement; accepting virtual currencies as a payment tool; exchanging virtual currencies with the renminbi.”
Protect the renminbi at all costs
The main concern from the three regulatory bodies is the exchange of cryptocurrencies for the renminbi, the national currency of China. The reason this statement was given then was due to the volatility in crypto markets. But this directive is nothing new.
In 2017, during the first Bitcoin bull run, the Chinese government banned crypto exchanges and prohibited initial coin offerings. They banned exchanges from offering fiat-to-crypto trading. This prevented anyone in China from trading renminbi for Bitcoin, or other cryptocurrencies.
This forced cryptocurrency exchanges like BTCC to shut down and Huobi and OKCoin to relocate overseas. But crypto trading in China carried on, either through offshore exchanges. Some exchanges still work in China, however, they offer only crypto-to-crypto trading. This means renminbis cannot be deposited to buy Bitcoin or Ethereum. Trading can only be done using other cryptocurrencies, like stablecoins, or exchange tokens like OKCoin and the Huobi Token.
China banning crypto transactions is to protect the national currency. This is to protect the renminbi against the volatility of cryptocurrencies. China is not looking at Bitcoin or other cryptos as a threatening medium of exchange.