China’s Continued Crackdown on Cryptocurrency: A New Wave of Regulations

CSRC’s Call to Action

On December 27, the China Securities Regulatory Commission (CSRC) made waves with an important announcement urging local authorities in Beijing to take decisive action against the public’s use of cryptocurrencies. Highlighting the rising risks, the announcement outlined various concerns, including a surge in crypto trading activities, the provision of digital currency mortgages, and the introduction of zero-interest loans.

The Risks of Digging Into Digital Currencies

The CSRC identified serious violations of the People’s Bank of China (PBoC) regulations. Four regulators from Beijing put their names on this joint announcement, emphasizing the severity of the situation. The crux of the message? The warning aimed to curb illegal activities related to cryptocurrencies and to keep the populace from getting too cozy with these digital assets.

Recent Strides in Regulatory Enforcement

In a parallel move, the PBoC ramped up its crackdown on crypto operations across China. On November 21, the central bank sent tremors through the market by taking concrete steps against entities involved in trading cryptocurrencies like Bitcoin (BTC). The impact was palpable; the markets took a nosedive. This swift action was complemented by an investigation in Shenzhen into cryptocurrency trading, showing that this crackdown is serious indeed.

Blockchain vs. Cryptocurrency: Understand the Distinction

While China continues to tighten the noose on cryptocurrencies, it paradoxically professes its support for blockchain technology. In late October, authorities stated that innovations in blockchain shouldn’t be misinterpreted as endorsements for cryptocurrency speculation. A publication under the ruling Communist Party even emphasized that:

“The rise of blockchain technology was accompanied by that of cryptocurrencies, but innovation in blockchain technology does not mean we should speculate in virtual currencies.”

What’s Next? The Digital Yuan’s Unique Identity

As the narrative unfolds, the deputy director of the PBoC, Mu Changchun, hinted at the forthcoming digital yuan. Importantly, he declared that the digital form of the yuan will be distinctly different from Bitcoin and stablecoins. This statement not only sets the stage for a potential revolution in China’s financial landscape but also highlights the government’s intent to maintain control over digital currency frameworks.