China Fears, Ban Financial Institutions And Payment Companies Using Cryptocurrency For Transactions

Illustration. (Photo: Unsplash)

JAKARTA - China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.

It was China's latest attempt to clamp down on the burgeoning digital trade market. Under the ban, such institutions, including banks and online payment channels, may not offer customers any services involving cryptocurrencies, such as registration, trading, clearing and settlement, the three industry bodies said in a joint statement on Tuesday, May 18. .

"Recently, cryptocurrency prices have skyrocketed and plummeted, and cryptocurrency speculative trading has rebounded, seriously violating the security of people's property and disrupting the normal economic and financial order," they said in the statement.

China has banned crypto exchanges and coin initials but has not barred individuals from holding cryptocurrencies.

Institutions must not provide crypto-currency savings, trust or underwriting services, or issue financial products related to cryptocurrencies, the statement also said.

The move is not Beijing's first step against digital currency. In 2017, China closed its local cryptocurrency exchange, shutting down the speculative market that accounts for 90 percent of global bitcoin trading.

In June 2019, China's central bank issued a statement saying it would block access to all domestic and foreign cryptocurrency exchanges and Coin Initial Offer websites, aiming to suppress all cryptocurrency trading with a ban on foreign exchange.

The statement also highlighted the risks of cryptocurrency trading, saying virtual currencies "are not backed by real value", prices are easy to manipulate, and trading contracts are not protected by Chinese law.

The three industry bodies are the China National Internet Finance Association, the Chinese Banking Association, and the China Clearing and Payments Association.