Chinese Central Bank Cracks Down on Cryptocurrency Transactions

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The Chinese central bank has brought a halt to banking sector financial institutions providing services in relation to cryptocurrency transactions, according to a report from the South China Morning Post. 

According to the Post an internal document issued by the People’s Bank of China to Chinese banking institutions on Wednesday places a blanket prohibition on cryptocurrency trading and settlement.

“Every bank and branch must carry out self-inspection and rectification, starting from today,” said the internal document.

“Service for cryptocurrency trading is strictly prohibited. Effective measures should be adopted to prevent payment channels from being used for cryptocurrency settlement.

“Banks should enhance their daily transaction monitoring, and the timely shut down of the payment channel once they discover any suspected trading of cryptocurrencies.”

The document stresses the prevention of “mass incidents” and public unrest that could potentially arise should Chinese cryptocurrency investors incur heavy losses.

Chinese financial institutions are already prohibited from holding cryptocurrencies as assets, while Beijing does not recognise digital money as legal tender, as is currently the case in Japan.

2017 was a fraught year for cryptocurrencies in China, with financial regulators launching a ban on initial coin offerings and cryptocurrency financing that capsized some of the country’s leading bitcoin exchanges.

PBOC has also issued warnings on the “disastrous” impacts of using cryptocurrencies as money, as well as indicated that it could overturn bitcoin mining in China by ordering local governments to starve the sector of power.

As a consequence China’s cryptocurrency traders, who previously accounted for 90% of global bitcoin transaction volumes, are increasingly shifting their trades abroad to countries such as Japan.

While keenly concerned about the risks involved, the Chinese central bank nonetheless remains enthusiastic about the potential for virtual currencies to transform the country’s finance sector, launching a study into the development of its own blockchain-based money system.

“China will be the first major country to launch a central bank digital currency in 2018,” said Chun Yin Cheung, a partner in PwC China’s risk assurance practice to the Post. 

“Although cryptocurrency exchanges were banned from China in September, the country has always taken a positive attitude toward central bank digital currency and blockchain, actively carrying out relevant research.”

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