China Bans Cryptocurrency Transactions

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October 13, 2021

The new waves of crypto prices were caused by Chinese regulators banning financial institutions and payment companies from serving crypto transactions.

Crypto investors have received warnings about speculative crypto trading, a common practice of similar announcements during the whole time of crypto existence.

Let’s stop on the actions themselves to see how they might influence the position of cryptocurrencies in the society. The ban states that banks and online services mustn’t offer customers any crypto-related services. Financial institutions are forbidden to make such operations as the exchange of cryptocurrencies, registration, trading, ICO, etc. What concerns individuals, they have the right to possess digital coins.

The new restriction limit in China

Chinese authorities have banned financial institutions to provide trust services, services for storing or pledging cryptocurrency. Also, companies are banned to release financial products related to cryptocurrency. The decision is made because of the speculativeness and volatility of the cryptocurrency due to the document.

The regulators warn crypto holders about the seriousness of consequences of crypto investments and safety of holdings. They mention that cryptocurrencies are not backed by real value, their prices are easy to manipulate and the Chinese law does not protect crypto trade contracts.

What was Bitcoin’s reaction?

The news from the Chinese government effected Bitcoin’s price at once. The price dropped below $34,000, but then the great coin recovered to $40,000.

Although this fall was the most rapid in recent months, crypto enthusiasts are used to such a roller coaster. The next shock for Bitcoin was made by Elon Musk’s announcements. Tesla CEO said that the company would no longer accept Bitcoin for buying cars. It resulted in 10% drop. At the same time, Tesla stores around $1,5 billion worth of Bitcoin.    

Restrictions can’t stop the huge crypto machine

There’s no doubt that crypto enthusiasts worry about any kind of changes concerning the great coin. However, there have always been the ups and downs at the history of its existence. Here’s a list just of some of crucial restrictions announced by authorities:

  • In 2017, China shut down local cryptocurrency exchanges.
  • In June 2019, the People’s Bank of China announced that it would block access to all domestic and foreign cryptocurrency exchanges and initial coin offering websites. The goal was to restrict cryptocurrency trading.
  • In January 2021, the head of the European Central Bank announced that Bitcoin needs to be regulated due to cases of speculation and money laundering.
  • In March, 2021, Reuters announced that India is going to ban cryptocurrencies.
  • Since April 30, the Central Bank of Turkey has banned the use of cryptocurrency to buy goods and services.

China is not against blockchain

The statement made by the People’s Bank of China says that Bitcoin’s price fluctuations “seriously violate people’s asset safety and disrupt normal economic and financial order”.

The position of the Chinese government to cryptocurrencies has been more or less understandable. Their regulations effect crypto price just for a while. These moves make things more difficult, but technically it’s still possible and legal for individuals to trade cryptocurrencies.

At the same time China supports the blockchain technologies. Giant companies like Alibaba, Baidu and Tencent have recently filed a number of patents related to the blockchain technologies.

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