China Securities Observation: Cryptocurrency speculation is risky and strict regulation is the general trend

Recently, Bitcoin has once again experienced a "roller coaster" market of soaring and then plummeting. While the frequent surges and plunges in prices reflect the extraordinary frenzy of speculation, illegal and criminal activities surrounding virtual currencies have also been continuously exposed, prompting all parties to further examine the regulation of virtual currencies. In fact, a broader consensus is forming to strengthen the regulation of virtual currency transactions. Recently, Bitcoin transactions have once again been "blocked" by some large commercial banks, which may contain new signals of stricter supervision.

The sharp rise and fall of prices is almost inseparable from virtual currency transactions. This feature has been fully demonstrated in the past two months. At the beginning of March, Bitcoin broke through the $60,000 mark for the first time in history. In mid-April, it turned around and fell sharply from the highest point of nearly $65,000, and lost nearly 30% of its market price in more than a week. In recent days, Bitcoin has started to dive again. On May 15, the price of Bitcoin fell below $46,000, almost returning to the level before the rise in March.

The huge fluctuations in prices reflect the prevalence of virtual currency speculation and the huge risks involved. Bitcoin is not a currency. By nature, it is a specific virtual commodity. As a commodity trading behavior on the Internet, ordinary people have the freedom to participate in Bitcoin transactions at their own risk. However, Bitcoin is essentially different from financial products. It has no actual value support, no sovereign credit and commercial credit, and transaction pricing is largely due to speculation. Ordinary investors may face huge trading risks when participating. Someone once calculated that from 2016 to the end of 2020, Bitcoin fell by 20% or more 10 times in total; fell by 30% 7 times; and fell by more than 48% 4 times.

In addition to transaction risks, illegal and criminal activities involving virtual currencies have also been on the rise in recent years. The China Financial Stability Report (2014) once pointed out the three major risks that Bitcoin transactions may bring: first, the online trading platform, process and rules of Bitcoin lack supervision and legal protection, which are prone to price manipulation and false transactions, and there are also risks in the security of account funds and clearing and settlement links; second, the price of Bitcoin lacks reasonable support, and it is easy to become a tool for speculation and even "bubble burst"; third, the flow of funds is difficult to monitor, which provides convenience for illegal and criminal activities such as drug and gun transactions and money laundering. Some media reported that the largest refined oil pipeline operator in the United States, which was recently blackmailed by hackers, was forced to pay the ransom in virtual currency, which also prompted relevant parties to further examine the supervision of virtual currency.

Recently, a domestic joint-stock bank banned accounts from being used for Bitcoin transactions, which sparked heated public debate. The bank said in a statement that the move was "to protect the property rights and interests of the public, maintain the legal currency status of the RMB, and prevent money laundering risks." This is not the first time that a financial institution has "blocked" Bitcoin transactions. Shortly after the People's Bank of China and other departments jointly issued a notice on preventing Bitcoin risks, more than a dozen domestic commercial banks announced a ban on Bitcoin transactions in 2014.

Bitcoin-related transactions are facing increasingly strict scrutiny and regulation around the world. Currently, regulatory authorities in many countries have either banned transactions or issued policies to impose strict restrictions. In recent years, relevant domestic departments have always maintained high pressure on virtual currency transactions, and there is a trend of continued tightening.

In the view of some observers, after many years, financial institutions have recently taken action against Bitcoin transactions again, which may have released a new signal of strict supervision. In this regard, participants in virtual currency transactions, especially investors, should pay attention. At present, there are no Bitcoin trading venues in China, and there are no consumer protection measures for "climbing the wall" to trade Bitcoin overseas. Once risks are encountered, the consequences can only be borne by oneself. In short, there are risks in cryptocurrency trading, and you need to be cautious when entering the market.