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China broadens cryptocurrency crack down

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Today China’s central bank, the People’s Bank of China, published a statement outlining actions against a broad range of cryptocurrency activities and ‘hype’. While there was a previous crackdown on cryptocurrency mining, today’s steps are far more substantial, addressing trading, banking on and off-ramps, insurance and individuals holding currencies. It also pulls in numerous government agencies to tackle virtual currencies.

Rather than stating investing in crypto is illegal, the central bank highlights that there is no legal protection and that investing “violates public order and good customs”. This statement was treated with some scorn on Twitter, and there were questions about the legal basis of “public order and good customs.” The response was that it shouldn’t be underestimated because such loose wording can be “upgraded infinitely”.

It’s probably not a coincidence that today AntChain, the Ant Group subsidiary that has been involved in issuing non-fungible tokens (NFTs) in China issued a statement on the topic. An official WeChat post reads: “Resolutely oppose all forms of digital collection hype, and resolutely resist any form of illegal activities in the name of digital collections, which are actually virtual currency-related activities.” Ant said it would use technical means to guard against price speculation and avoid digital collections being turned into financial products. Ant Group had to pull its IPO last year after a government crackdown on antitrust grounds.

The central bank’s announcement targets all aspects of cryptocurrency trading including issuance, fund raising, and derivatives. It makes clear these activities are considered criminal.

If overseas exchanges provide these services to Chinese residents, that’s also considered illegal. Even if someone works in tech support, these people will “be investigated in accordance with the law.” It’s notable that Hong Kong-based exchange FTX is migrating to the Bahamas.

China’s central bank is also clamping down on commercial displays and promotion of cryptocurrencies and says “illegal advertisements” must be dealt with promptly. One of the main cryptocurrency news sites has a banner at the top of the page that states it “invites readers to supervise and resolutely eliminate all kinds of token issuance, investment recommendation and virtual currency hype information”.

It’s not surprising that Bitcoin dropped by 10% following the news.

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