China’s central bank, the People’s Bank of China (PBOC) ordered Monday all financial institutions to stop facilitating cryptocurrency transactions. The country has intensified the crackdown on Bitcoin (BTC) mining and trading activities.
Banks must not provide products or services such as trading, clearing and settlement for crypto transactions, the PBOC said in a statement. This comes after the government’s crackdown on crypto mining activities in the Sichuan province, the world’s largest hydro-powered Bitcoin mining area.
Cryptocurrencies plummeted in the wake of the announcement. Bitcoin fell below $33,000 level and Ether (ETH) dropped below $2,000 for the first time since May 23.
China has taken similar actions to try and ban bitcoin trading in the country in the past few years. However, with the latest order, the government attempts to threaten to close access to the banking system from individuals who engage in bitcoin trading activities.
First, the latest ban shows the direct order from China’s central bank, PBoC. Firstly leaked by the Agricultural Bank of China, the announcement is likely the result after a PBoC meeting with five major banks and China’s dominating mobile payment firm Alipay. In the meeting, PBoC reiterated the prevention of crypto transactions in bank accounts, banning major lenders and the payment firm from providing services related to crypto transactions.
China: New Level of Crypto Regulation
The latest announcement instructed domestic banks and the payment firm to “thoroughly inspect and monitor” their clients’ transactions for potential crypto involvement. If there is any crypto-related activity found, they have to report to PBoC immediately, according to the statement.
While previous bans focused on crypto exchanges in the country, PBoC has notably pushed banks to cut ties to the crypto over-the-counter (OTC) activities in the latest order.
All banks have to identify the banking accounts owned by crypto exchanges’ and over-the-counter dealers, and cut off the funds transfer via those accounts, said PBoC. This is in line with the government’s concern on the risk for illegal cross-border transactions and money laundering using cryptocurrencies.
After China’s latest crackdown on Bitcoin mining and crypto trading, what’s next for the cryptocurrency market?
“When the PRC goes after something, they tend to have their way… I think that they believe it’s a direct threat to the regime because what it is, is a system that’s outside their control,” CNBC’s “Mad Money” host Jim Cramer said.
Cramer said he sold almost all of his Bitcoin holding. Considering the headwinds for Bitcoin, “I’m saying that this is not going up because of structural reasons.”
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