China’s Xinhua News Agency has launched an editorial broadside against Bitcoin and other virtual currencies, claiming that they are “fake” forms of financial innovation that create economic hazard and risk
The editorial by Tan Moxiao entitled “Firmly Correcting the Fake Financial Innovation Needed to Elude the Real Economy” (坚决纠正脱离实体经济需要的伪金融创新) notes that “the hazard and risk of Bitcoin and other virtual currencies has continually been apparent, and engendered a heavy regulatory response.
“Since the start of the year some Bitcoin and blockchain innovations have deviated from their original intention, and in the wake of the frenzied growth in Bitcoin prices, the speculative atmosphere in the Bitcoin and other sectors has become intense.
“Price fluctuations have intensified, and investors have blindly followed the trend of speculation, or even lost all reason, threatening real economic development…the financial and social risk and hidden dangers created by ‘virtual currencies’ is hard to overlook.”
The Xinhua editorial arrives just following the suspension of operations by China’s three leading Bitcoin platforms – BTC China, Huobi.com and Top Coin, who jointly account for 60% of domestic virtual currency transactions.
According to domestic media reports Chinese authorities are requiring that the senior executives of all three Bitcoin platforms remain in Beijing while regulators continue investigations.
Earlier this month the People’s Bank of China issued the “Public Notice Concerning the Prevention of Cryptocurrency Issuance Financial Risk” (关于防范代币发行融资风险的公告) in conjunction with six other central government departments, prohibiting any individuals or organisations from engaging in ICO’s.
The public announcement called for the immediate suspension of all cryptocurrency financial activities, as well as for individuals and organisations that have raised funds via cryptocurrency issuance to make arrangements for repayments to investors.
It also stated that “so-called cryptocurrency financing and transaction platforms” are prohibited from engaging in transactions involving virtual currencies, the conversion of virtual currencies into fiat money, and the provision of services including pricing and information intermediation in relation to virtual currencies.
The Xinhua editorial said that the “cooling down” of China’s Bitcoin mania demonstrates the determination of regulators to strike hard against illegal conduct, and make the prevention and control of financial risk an even greater priority.
“Finance is the lifeblood of the real economy, and servicing the real economy is the natural duty and purpose of finance, as well as the fundamental means of preventing financial risk.
“Financial innovation must service the real economy and conform to regulatory requirements, and those forms of fake financial innovation that don the guise of innovation, or are even illegal forms of financial conduct, must be dealt a heavy blow and promptly contained.”