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China's latest crypto ban is the strictest, insiders say

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It's getting worse for crypto in China. A comparison of China's ban on crypto trading on Friday with previous crypto-related bans shows that the latest version is the most severe. Anyone facilitating the trade will be prosecuted, including those who live in China but work for an offshore crypto exchange that provides services to China.


It's getting worse for crypto in China. A comparison of China's ban on crypto trading on Friday with previous crypto-related bans shows that the latest version is the most severe. The People's Bank of China (PBoC) announced tougher measures on cryptocurrency trading and conducting illegal crypto transactions for the first time, including services from overseas crypto exchanges. The September 24th announcement prohibits banks and other financial institutions from offering cryptocurrency services, including transactions from fiat to cryptocurrency or from one cryptocurrency to another. Anyone facilitating the trade will be prosecuted, including those who live in China but work for an offshore crypto exchange that provides services to China.

Ten institutions, including the PBoC, were included in Friday's announcement, a clear sign of the seriousness of the recent ban. The former was signed by up to seven agencies. The ban "clearly demonstrates that this is a multi-agency effort," said Bill Bishop, author of the Synoticism Bulletin. China's Cyberspace Administration (CAC), Supreme People's Court (SPC), Supreme People's Procuratorate (SPP) and Public Security Bureau (PSB) are now involved in the recent raids. The involvement of law enforcement, not civilians, means that crypto trading in China has now added to the “financial crime aspect,” Bishop told CoinDesk. In general, the SPC, SPP, and PSB are the three main components of China's judiciary. This means that China is really doing business this time.

"It's important to see the editor of the notice," said Rachel Lynn, founder and CEO of Asia-based derivatives platform (DeFi) Derivate SynFutures. "The involvement of law enforcement makes the nature of [the bullying] much more serious this time around." The CAC, which participated in China's initial Coin Offering Ban (ICO) in 2017, has several key roles in "managing, coordinating and monitoring online content management and managing corporate regulatory approvals related to online reporting of news", according to the online legal service for law. practical. "CAC will look for websites and services that advertise offshore crypto platforms or provide access to offshore crypto platforms," Bishop added.

Some market watchers see nothing new in the recent crypto ban. China has banned cryptocurrency-related items since 2013, the year China banned financial institutions from offering Bitcoin-related services. The same message known as Bitcoin can be traded and exchanged freely online as a commodity. However, this latest ban makes it clear that cryptocurrency trading involves “legal risk” and that “any legal entity, non-company or individual” investing in virtual currencies and related derivatives violates “public order and morality”. "Civil action in relation to trading in cryptocurrencies is unlawful and the parties must be held liable for all losses arising from trading activities with cryptocurrencies," the statement said Friday. “We see this basically as a 'Hold cryptocurrency and trade at your own risk' statement. You will have no means to protect yourself if something happens,” wrote Chinese cryptocurrency company VC in a note verified. "The definition of 'public order and morality' will be the focus of attention in the future as the current statement is somewhat vague."

The company requested anonymity due to the sensitivity of the matter. High Repression mentions nine laws and regulations, including the Regulation on the Prevention and Handling of Illegal Fundraising and the Regulation on the Administration of Futures Trading. "This is certainly much bigger and bigger than the mining industry crash," Bishop said. “This could easily be interpreted to have something to do with crypto, which is likely illegal according to the status menu cited in the announcement.” Some market watchers note that the dates on the two releases (one for trading, the other for extraction) indicate that they were written well before Friday's release. The PBoC ban on crypto trading began on September 15; The ban on cryptocurrency mining by China's National Development and Reform Commission (NDRC) was enforced on September 3. Chinese acquaintances said the discrepancy was not surprising because of the coordination in drafting the document. “Few people in China question the data [because] everyone is used to having guidelines published a few days ago that were published later,” said China-based crypto influencer Colin Wu.

Despite the weight of the new language, some remain positive about the future of cryptocurrencies when it comes to China. Justin Sun, founder of blockchain Tron, said the recent ban did not deny citizens "freedom to own and exchange virtual currency," meaning there is no clear prohibition on owning cryptocurrencies. This is in line with the 2013 ban on Bitcoin trading which is similar to trading in goods. “Don't be too pessimistic,” he said via audio news from WeChat. "...I think the biggest possibility in the future is that once the big countries in Europe, North America and Japan, South Korea have clearer crypto regulatory guidelines, China will slowly introduce laws and regulations for crypto. "Huobi, a popular crypto exchange in China, declined to comment on the ban, while OKEx told CoinDesk it was "still investigating".

Chinese authorities ordered a new crackdown on cryptocurrencies on Friday and banned almost all cryptocurrency trading activity. The National Bank of China (PBOC) has released a list of prohibited activities, including some previously in a regulatory Gray area, while the National Development and Reform Commission (NDRC) has outlined plans to phase out extraction. In May, the country's State Council ordered the suppression of cryptocurrency mining and trading, sending dozens of crypto companies overseas. The "Notice to Further Prevent and Eliminate the Risk of Hype in Virtual Currency Trading" signed by China's leading financial and cyber regulator prohibits all cryptocurrency activity.

The complete list of prohibited activities includes exchanging one type of cryptocurrency for another. In 2017, China banned trading between fiat and crypto only. The notice prohibits banks and other financial institutions from offering crypto-related services. China's three financial industry regulators said the same in May in a statement posted by the PBOC on their WeChat accounts. Forex staff, including those involved in technical support, are being investigated for their knowledgeable participation in the crypto industry. Crypto exchanges were expelled from China in 2017. While they moved their headquarters overseas, most of their activities remained domestically. The statement also called for increased censorship of information about virtual currencies. Websites and apps running crypto businesses will be shut down. In the past two months, public crypto voices have been silenced, including news source CoinWorld and deputy director of a Shanghai securities firm.

Regulators have stated that they want to establish an early warning mechanism and stop the hype in cryptocurrency trading and mining. The statement called on the police to act “firmly” against illegal activities enabled by cryptocurrencies, including money laundering and gambling. The notice was approved by the PBOC, Cyberspace Administration, Supreme People's Court, Ministry of Industry and Information Technology (MIIT), Ministry of Public Security (MPS), General Administration of Market Supervision, China Banking and Insurance Commission (CBIRC) and China Securities Regulatory Commission. Meanwhile, China's top state planning agency, the NDRC, has issued a separate “Notice on Virtual Currency Adjustment”.

 The statement said the goal is to get rid of the "hidden risks" of cryptocurrencies while pursuing China's carbon neutrality goals. While it doesn't completely ban crypto mining, it has led local authorities to curb illegal mining activities with plans to exit the industry. Mining should be seen as an "obsolete" industry. No new projects are allowed and existing projects can be terminated. The notification transferred full control of the minefields to the central authorities from the provincial and municipal authorities. This requires local authorities to identify cryptocurrency operations, end government and tax support for mining projects, accelerate exit from existing mining activities, and stop all new investments in mining and financial services for miners.

Many crypto miners left China and took their mining platforms with them after the May crackdown. But not all. Smaller miners who don't have the resources and connections to move overseas stay, three Chinese miners said. Some miners quietly joined after the initial shutdown. In today's statement, the NDRC directed local authorities to compile a list of current and developing mining projects and their features. They are particularly interested in mines being built in state-sponsored big data and high-tech parks. In 2020, some local governments, such as the city of Ya'an in Sichuan, issued preferential mining policies. The notice also asks authorities to inspect power grids for abnormal power consumption related to illegal extraction and to increase on-site inspections in big data centers. The notice prohibits cryptocurrency activity under the guise of running a data center, a common practice among Chinese miners. The NDRC wants governments to make clear distinctions between mining, blockchain and big data operators and cloud operators in their inspections.

Filecoin and Chia production in particular were not badly affected in May as they don't use much electricity and don't require any special equipment. When asked about their activities in July, representatives of two companies that previously identified themselves as Filecoin miners said that they are data center operators. The notice also urges power companies to stop delivering electricity to mines via direct lines and other methods bypassing the national grid, prevents mining companies from entering the power market, and calls for a "normal" increase of 0.3 yuan ($0.05)). per kilowatt/hour on electricity costs for crypto mines. City governments may increase price increases at their own discretion. The notice was also signed by the Central Propaganda Department, Central Network Information Service, MIIT, MPS, PBOC, Ministry of Finance, Tax Administration, General Market Supervision Authority, CBIRC and the National Energy Council.

“Once again the Chinese government has been dealing with Bitcoin. This has happened at least seven times since 2013 – and twice this year. The market reacts with a drop in price each time, but each time the effect is smaller and shorter. The history of “China bans Bitcoin” is almost achieved meme status in the Bitcoin community." “China's latest move is not surprising given its anti-crypto activities to date. ... If China continues to impose such magnitude, crypto trading will shift to places with a more stable regulatory environment, meaning more predictable liquidity and healthier, more stable trading around the world. The People's Bank of China has released a list of prohibited activities, which previously included some in a regulatory gray area, while the National Development and Reform Commission has drawn up plans to halt production, according to CoinDesk's Eliza Gkritzi.

The notice prohibits banks and other financial institutions from offering crypto-related services. In addition, regulatory authorities have announced that they want to create a mechanism to warn and stop “noise” in cryptocurrencies and mining. According to regulators, cryptocurrencies should be seen as an "obsolete" industry. New projects are not allowed, and existing projects are given time to complete. SEC advises Tether investigation: The US Securities and Exchange Commission (SEC) could investigate Tether and Tether Operations Limited. The SEC said it would not release the Tether-related records because they were collected for law enforcement purposes, according to a response to the Freedom of Information Act (FOIA) by The New Republic officials. "We retain records made at your request under 5 USC Section 552(b)(7)(A). This exception protects against disclosure records made for law enforcement purposes and which, when published, could reasonably be expected to interfere with enforcement activities. law,” the response said. The SEC response also stated that keeping a record of exceptions does not mean that a lawsuit or enforcement action will be filed.

The Chilean Central Bank will form a team to study digital currency issuance: The Chilean Central Bank is studying the creation of a digital currency by the Central Bank (CBDC). Any possible currency is issued in the same way as banknotes and coins and can be used for transactions within commerce or between individuals, or for financial institutions to process payments between partners, the central bank said. The Group plans to present a white paper in the first quarter of 2022.

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