Virtual currency faces more regulation
Experts said on Tuesday that after the central bank strengthened the ban on the provision of related services by financial institutions. Moreover, China expected to introduce more stringent measures to strengthen the crackdown on the illegal mining and trading of virtual currencies.
They stated that regulations to prevent speculation in virtual currencies should be implemented before the market is disrupted. After the world’s major cryptocurrencies have sold off sharply in recent days. Cross-border cooperation in currency supervision may also be needed.
At noon on Tuesday, the price of Bitcoin, the world’s largest virtual currency. Fell to US$32,920, a drop of nearly 50% from its peak in April. It hit a two-week low of $32,350 late on Monday. Ether also plummeted 13% to US$1,950 before regaining some of its losses on Tuesday.
The price drop of major cryptocurrencies came after a statement issued by the People’s Bank of China on Monday. It urges commercial banks and payment platforms to stop services related to cryptocurrency transactions and speculative investments.
Central bank officials recently conducted regulatory talks with five large commercial banks and Alibaba’s Alipay.
The banks are: Industrial and Commercial Bank of China; Agricultural Bank of China; China Construction Bank; the statement said, Postal Savings Bank of China and Industrial Bank Co., Ltd.
Both banks and Alipay said they would strengthen the supervision of fund transfers and prohibit. Some payment and settlement services related to cryptocurrency transactions and initial coin offerings.
Dong Ximiao, chief researcher of consumer finance at China Merchants Alliance. Furthermore, Chinese regulators should take targeted measures to crack down on illegal mining and trading of virtual currencies.
Dong said that financial regulators should cooperate more with judicial departments to deal with financial institutions involved in virtual currency transactions. Furthermore, he emphasized that they should stop all Bitcoin mining in the country.
Dong said that international cooperation in regulating virtual currencies also needs to be strengthened, which will require information sharing.
The central bank statement stated that virtual currency speculation disrupts the economic and financial order. Increases the risk of illegal cross-border asset transfers, money laundering and other illegal and criminal activities. However, seriously violates the security of the people’s assets.
The central bank also urged financial institutions to identify virtual currency exchanges and over-the-counter trading accounts, and cut off payment channels for virtual currency transactions in a timely manner.
Yang Dong, executive dean of the Blockchain Institute of Renmin University of China. The central bank tightening the supervision of virtual currencies, which considered encrypted assets, not real currencies.
The Chinese authorities have put pressure on non-bank mobile payment service providers to share more transaction data with regulators. Which is another sign of strengthening supervision of digital currencies and payment services.
A research report by Fitch Ratings stated that the ensuing new regulations aimed at restricting private companies from collecting too much personal data.
The Sichuan provincial government announced on Friday that the Inner Mongolia Autonomous Region has taken similar regulatory measures to stop cryptocurrency mining. However, restricting Bitcoin mining and trading has become a goal.
Financial analysts recently warned that as new digital currencies and payment innovations enter the market. The authorities will need to improve their regulatory capabilities. Tobias Adrian, Financial Advisor and Director of the Monetary and Capital Markets Department of the International Monetary Fund, said: “Regulation and careful supervision are the keys to building trust in the new digital currency.”
He added, The regulation, design, and provision of digital currencies must allow countries to maintain control over monetary policy, financial conditions, capital account opening, and foreign exchange regimes.
Without proper supervision, digital currency may become a virtual safe haven for criminals to conduct illegal financial transactions. Furthermore, He said that a strong framework needs effectively implemented to combat money laundering and stop the financing of terrorism.