China bans finance firms from servicing crypto transactions

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 what was a burgeoning digital trading market. Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrencies, such as registration, trading, clearing and settlement, three industry bodies said in a joint statement on Tuesday.

“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” they said in the statement. The three industry bodies are: the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.

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

The institutions must not provide saving, trust or pledging services of cryptocurrency, nor issue financial product related to cryptocurrency, the statement also said.

No digital tokens

Bitcoin and other main cryptocurrencies slumped after the People’s Bank of China conveyed a statement reiterating that digital tokens cannot be used as a form of payment.

The largest token fell as much as 7.3 percent to $40,139 in Asia on Wednesday, continuing a week-long slide sparked by Tesla founder Elon Musk’s back-and-forth comments on the company’s holdings of the coin. Ether, Dogecoin and last week’s sensation, Internet Computer, also retreated.

The moves were not Beijing’s first moves against digital currency. In 2017, China shut down its local cryptocurrency exchanges, smothering a speculative market that had accounted for 90 percent of global Bitcoin trading.

In June 2019, the People’s Bank of China issued a statement saying it would block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites, aiming to clamp down on all cryptocurrency trading with a ban on foreign exchanges.

The statement also highlighted the risks of cryptocurrency trading, saying virtual currencies “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.