On Wednesday, 19 May, China announced it would bann financial institutions and payment companies from providing services related to cryptocurrency transactions. This caused a lot of fear in the crypto market. But some in the crypto community pointed out that this doesn’t mean that Chinese citizens can’t partake in buying crypto.
So, what’s the deal?
An article from Coindesk.com stated:
However, it conveys a pointed message to commercial banks and payment companies that have been friendly to crypto-related businesses.https://www.coindesk.com/beijings-crypto-crackdown-is-not-new-but-dont-dismiss-it
But what is missing here, is a real change in legislation that will actually affect the crypto market. There is nothing here that the Chinese government has done which will fundamentally change the way the Chinese people interact with crypto. Although that being said, a former district attorney from Beijing Fengtai stated:
“Although yesterday’s notice looks largely the same as before, it is a more explicit warning specifically for Chinese banks and payment processors.”Tao Luo, former Beijing Fengtai district attorney and chief consultant at Global Blockchain Compliance Union.
According to the same article from Coindesk, Chinese financial institutions still allow transactions from central crypto exchanges to people’s personal bank accounts. However, this “message” is scaring people enough to think that the Chinese government is going to come down hard on crypto. And it’s certainly showing in the market. This news came the day before the big crash on Wednesday that saw Bitcoin drop to $28’000 in less than an hour. No doubt, this news alone could not have caused the market to do what it did. It was likely a combination of many different events. Including Elon Musk’s tweets, as well as news in America regarding the IRS (Internal Revenue Service).
The article also says that the number of available service providers for financial institutions will drop in the short term due to this warning. A partner of a South Korea crypto venture capital firm expressed his opinion of the situation saying:
“That fact that the notice comes from these ‘semi-official’ associations indicates the regulators might just want to give the banks a wake-up call. There will be more serious consequences if it is from the central bank”Aries Wang, https://www.coindesk.com/beijings-crypto-crackdown-is-not-new-but-dont-dismiss-it
This could just be the beginning of a series of legislations that will change how the Chinese people and government interact with the crytpo industry. But again, there is nothing that has fundamentally changed per this announcement. Hence, one could argue the story is overblown. Is it possible this event was to help crash the market this week? Nobody knows. But it certainly seemed like an inconvenient time for this news to be released, considering how vulnerable the market was.
The topic of government regulation isn’t going to go away. As the crypto industry is growing, it is conceivable that institutions and governments will want to regulate it. But as history shows, sometimes when powerful institutions try to regulate an industry, it becomes even more popular and affluent.
As of right now, legislation in China has not revoked people’s rights to own and trade crypto. So, there really shouldn’t be a concern. If you enjoyed this article then perhaps you’ll also like reading CBDCs: The Scary Digital Currencies Coming Our Way
Aaron is passionate about blockchain and has been an investor in cryptocurrencies for the past years. He enjoys engaging with other people in the cryptocurrency community online, particularly on Telegram, and learning from experts.