Caixin
Jun 22, 2021 07:42 AM
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China Dragoons Banks, Alipay Into Crypto Crackdown

China has longstanding rules that bar banks from offering crypto-related services
China has longstanding rules that bar banks from offering crypto-related services

China’s central bank called a meeting with several major banks and payment provider Alipay to reinforce a ban on cryptocurrency trading, the latest move in a sweeping clampdown on crypto speculation.

The People’s Bank of China summoned representatives from Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Postal Saving Bank of China, Industrial Bank and Alipay, the payment service of Ant Group, and told them not to provide crypto-related services, according to a statement issued Monday by the central bank.

Cryptocurrency activities “disrupt financial order and also breed risks of criminal activities like illegal cross-border asset transfers and money laundering,” the central bank said. All banks and payment companies must not provide services related to cryptocurrency transactions, it said.

It was the latest signal that China will stick to its tough stance against digital tokens like Bitcoin. In May, China’s Financial Stability and Development Committee warned the crypto market that it would crack down on cryptocurrency mining and trading as part of an effort to control financial risks, promoting declines in major virtual currencies.

In the following weeks, several Chinese regions and provinces including Inner Mongolia, Xinjiang, Qinghai, Yunnan and Sichuan moved to shut down crypto mining operations.

China has long expressed displeasure with the anonymity provided by cryptocurrencies and since 2017 has banned all virtual currency exchanges and fundraising. The country has longstanding rules that bar banks from offering crypto-related services. However, in the past few years, individuals have moved to trade the digital coins on over-the-counter platforms and even offshore exchanges.

In the Monday statement, the central bank ordered the financial institutions to launch sweeping inspections of all accounts linked to crypto exchanges and over-the-counter platforms and to cut off their capital flows.

The banks pledged to follow the central bank’s orders and step up inspections of crypto activity.

Alipay also said it would “continue to conduct a comprehensive investigation and strike against virtual currency transactions” and “intensify” its crackdown on cryptocurrencies.

Bitcoin stayed near the day’s lows after China’s announcement, trading down 9% Monday at $32,500.

Bloomberg contributed to this story.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@Caixin.com)

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