China bans financial institutions from cryptocurrency related transactions

In a development that marks China’s latest attempt to clamp down on speculative trading of cryptocurrency, Beijing has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, warning investors against speculative crypto trading.

Under the ban, institutions including banks and online payments channels are disallowed to offer clients any services involving cryptocurrency, such as registration, trading, clearing and settlement.

“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,” said three industry bodies including National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China, in a statement.

While China has banned crypto exchanges and initial coin offerings it has not barred individuals from holding cryptocurrencies. Such institutions are not only banned from providing saving, trust or pledging services of cryptocurrency, they are also banned from issuing financial product related to cryptocurrency, said the statement from the trio.

This is not the first time China has moved against digital currencies. In 2017, China shut down its local cryptocurrency exchanges, delivering a crushing blow to a speculative market that had accounted for 90% 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 development underscores and highlights the inherent risks revolving around trading in cryptocurrency since they “are not supported by real value” and their prices are easily manipulated; trading contracts are also not protected by Chinese law.

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