Powerful Central Bank Of China Drops Hammer On Crypto Bubbleheads: Banks Must Block Crypto Transactions

Powerful Central Bank Of China Drops Hammer On Crypto Bubbleheads: Banks Must Block Crypto Transactions

China crypto

An advertisement for Bitcoin is displayed on a tram in Hong Kong, May 12, 2021. China's biggest banks promised Monday, June 21, 2021, to refuse to help customers trade Bitcoin and other crypto after the central bank said executives were told to step up enforcement of a government ban. (AP Photo/Kin Cheung, File)

The price of bitcoin fell to around $32,000 and ether dropped below $2,000 after China intensified its ban on crypto, announcing on Monday that it has ordered banks to stop all virtual-currency transactions.

Banks must not provide products or services such as trading, clearing and settlement for crypto transactions, the Peoples Bank of China said in a statement.

Officials from payment service provider Alipay, Industrial and Commercial Bank of China and Agricultural Bank of China were summoned to a meeting, Bloomberg reported.

“The PBOC crackdown is going further than initially expected,” said Jonathan Cheesman, head of over-the-counter and institutional sales at crypto derivatives exchange FTX. “Mining was phase one and speculation is phase two.”

Most of the world’s bitcoin is produced in China, which subsidizes coal-fired power plants to produce some of the cheapest energy in the world.

CBOC’s actions against crypto are not new. China banned Chinese banks and other institutions in 2013 from handling cryptocurrencies. In April, China announced that it had sent an emergency notice to data centers involved in crypto mining to better understand how the energy-intensive practice is impacting the country’s electricity consumption. In May, China reinforced its crackdown against bitcoin trading and crypto mining, threatening punishment for violators and saying tighter regulations were needed to protect the country’s financial system.

Despite the 2013 ban, regulators appear to be worried that the government-controlled financial system could be exposed to risks, and that crypto users could hurt efforts to control the financial system.

In its recent announcement, China’s central bank said cryptocurrency trading “disrupts normal economic and financial order.” It said virtual-currency transactions present a risk of illegal cross-border transactions and money laundering.

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The four major state-owned Chinese commercial banks and Alipay promised to monitor customers better and block the use of their accounts to buy or trade crypto.

Regulators in several Chinese regions have ordered the shutdown of cryptocurrency mining operations, Associated Press reported.

The Chinese central bank is reportedly close to developing a digital yuan that could be tracked and controlled by the government. More than 60 central banks are considering offering central bank digital currencies including the U.S., Russia, and the European Union.