Strictly prohibit virtual currency trading speculation. The central bank interviewed some banks and payment institutions

To crack down on speculation in virtual currency transactions, regulatory authorities have taken new actions.

The People's Bank of China announced on June 21 that in order to thoroughly implement the relevant decisions and arrangements of the CPC Central Committee and the State Council, implement the spirit of the 51st plenary meeting of the Financial Committee of the State Council, crack down on speculation in virtual currency transactions such as Bitcoin, protect the property safety of the people, and maintain financial security and stability, the relevant departments of the People's Bank of China recently summoned some banks and payment institutions such as Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Postal Savings Bank of China, Industrial Bank and Alipay (China) Network Technology Co., Ltd. regarding the issue of banks and payment institutions providing related services for virtual currency trading speculation.

It is necessary to cut off the transaction funds payment link in time

The People's Bank of China stated that virtual currency trading speculation activities disrupt the normal order of the economy and finance, breed risks of illegal cross-border transfer of assets, money laundering and other illegal and criminal activities, and seriously infringe on the property safety of the people. All banks and payment institutions must strictly implement the "Notice on Preventing Bitcoin Risks" and "Announcement on Preventing Token Issuance and Financing Risks" and other regulatory provisions, earnestly fulfill customer identity identification obligations, and shall not provide account opening, registration, trading, clearing, settlement and other products or services for related activities. All institutions should comprehensively investigate and identify the capital accounts of virtual currency exchanges and over-the-counter dealers, and promptly cut off the transaction capital payment link; analyze the capital transaction characteristics of virtual currency trading speculation activities, increase technical investment, improve the abnormal transaction monitoring model, and effectively improve the monitoring and identification capabilities; improve the internal working mechanism, clarify the division of labor, consolidate responsibilities, and ensure that relevant monitoring and disposal measures are implemented in place.

The participating institutions stated that they will attach great importance to this work and, in accordance with the relevant requirements of the People's Bank of China, will not carry out or participate in virtual currency-related business activities, will further increase the intensity of investigation and disposal, and take strict measures to resolutely cut off the funding payment links for virtual currency trading speculation activities.

A reporter from China Securities Journal noticed that after the news of the talks was released, the Industrial and Commercial Bank of China and other institutions that were interviewed have stated that they will be prohibited from directly or indirectly providing virtual currency-related services to customers.

Heavy blows are frequently taken to rectify the situation

In recent years, regulatory authorities have never stopped supervising and regulating the field of virtual currencies. For example, in December 2013, the People's Bank of China and five other ministries and commissions issued a "Notice on Preventing Bitcoin Risks" which pointed out that Bitcoin is a specific virtual commodity in nature and does not have the same legal status as currency. It cannot and should not be circulated and used as currency in the market.

In September 2017, the People's Bank of China and other departments jointly issued the "Notice on Preventing Risks of Token Issuance and Financing", which clearly stated that token issuance and financing refers to the financing subject raising so-called "virtual currencies" such as Bitcoin and Ethereum from investors through the illegal sale and circulation of tokens. It is essentially an act of illegal public financing without approval, and is suspected of illegal sale of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities. Relevant departments guided local governments to centrally ban 173 platforms, and since then maintained a high-pressure regulatory posture, and a total of 38 new domestic platforms have been cleared.

In May this year, the Internet Finance Association, the Banking Association, and the Payment and Clearing Association jointly issued an announcement requiring that member institutions shall not engage in virtual currency transactions and exchanges or other related financial businesses, resolutely resist illegal financial activities related to virtual currencies, and not provide accounts and payment settlement, publicity and display services for virtual currency transactions. At the same time, the public is reminded to strengthen risk prevention awareness, not to participate in virtual currency-related transaction speculation activities, and be careful to prevent personal funds from being damaged.

On May 21, the 51st plenary meeting of the Financial Committee of the State Council clearly proposed to crack down on Bitcoin mining and trading. Since then, many places have launched crackdowns on Bitcoin mining and trading.

On May 25, the Inner Mongolia Development and Reform Commission issued the "Eight Measures to Resolutely Crack Down on and Punish Virtual Currency "Mining" (Draft for Comments)". At present, some regions with lower electricity prices, such as Yunnan, Qinghai, and Sichuan, have also issued documents requiring the cessation of virtual currency "mining".

Zhou Jianhua, an analyst at Zhongyuan Securities, said that Bitcoin speculation has spawned a large number of copycat "mining" behaviors, causing a huge waste of electricity resources and is not in line with the requirements of my country's "dual carbon strategy."

Beware of the dangers of “cryptocurrency speculation”

Regulators and experts emphasize that Bitcoin is fundamentally different from financial products. Bitcoin trading is ultimately speculation.

Industry insiders analyzed that there are at least three major risks in speculating on virtual currencies: first, virtual currencies such as Bitcoin are fundamentally different from financial products. They have no actual value support, no sovereign credit or commercial credit, and their prices can be easily manipulated, causing sharp rises and falls. Second, as far as Bitcoin is concerned, there are currently no Bitcoin trading venues in the country, and there are no consumer protection measures for "climbing over the wall" to buy Bitcoin abroad. Investors can only bear any losses at their own risk. Third, virtual currencies such as Bitcoin are susceptible to "Musk-style" speculation, and investors will be "cheated" in a short period of time, suffering huge economic and property losses.

In the view of Chen Xing, chief analyst of China-Thailand Macroeconomics, caution is needed in virtual currency investment and trading, especially speculation with leveraged trading. The total market value of Bitcoin is relatively small, less than 2% of US stocks and only about 4% of the size of US Treasury bonds. The participants are relatively limited, so the price is inevitably characterized by high volatility.