China has banned all forms of cryptocurrencies. The country has also prohibited working for foreign-based cryptocurrency exchanges. The latest ban is the most severe and sweeping, causing the value of Bitcoin to drop by 5% and that of Ethereum to crash by 9%. China said people dealing in cryptos risk legal prosecution and possible imprisonment.
The ban was signed by the Cyberspace Administration of China (CAC), the Supreme People’s Court (SPC), the Supreme People’s Procuratorate (SPP), and the Public Security Bureau (PSB). The involvement of federal regulatory agencies and law enforcement makes the ban serious and gives it a “financial crime aspect” for anyone violating the order.
According to technical and security analysts, the three main agencies involved in China’s judicial operations are the SPC, SPP, and PSB.
“It is important to see the issuers of the notice,” said Rachel Lin, founder and CEO SynFutures. “The involvement of law enforcement agencies makes the nature [of the crackdown] this time much more serious.”
The CAC on the other hand is involved with the supervision and coordination of online content in line with government policies and protocols. To this extent, the agency will rigorously “go after any sites and services that advertise or provide access to offshore crypto platforms,” said Bill Bishop, author of the Sinocism newsletter.
The People’s Bank of China (PBoC) warned all financial institutions across the country that all forms of cryptocurrency transactions are banned, and this includes dealing in or working for crypto exchange firms in other countries. The National Development and Reform Commission also revealed that China will create “new systems” that will offset the financial risks of shutting down cryptos in the country.
Chinese Vice Premier Liu He in May warned that the government would shut down “Bitcoin mining and trading activity” in order for the country to gain economic stability. This effectively means that financial institutions, payment companies, and banking watchdogs should not carry out digital currency services with customers.
Some analysts are of the view that the Chinese government only wants people to understand the risks associated with cryptocurrency trading, and not banned the product. But others are of the opinion that it is better to tread safely than fall into the waiting hands of law enforcement and risk imprisonment.
“This is certainly much bigger and more expansive than the destruction of the mining industry,” Bishop said. “It could easily be construed as making anything related to crypto possibly illegal under the menu of statutes the notice cites.”