The agencies said Tuesday that financial institutions and payment companies should not participate in any transactions related to cryptocurrency, nor should they provide crypto-related services to their clients.
“Prices of cryptocurrency have skyrocketed and plummeted recently, and speculative trading has bounced back. This seriously harms the safety of people’s property and disturbs normal economic and financial orders,” said the statement from regulators supervised by the People’s Bank of China and the China Insurance and Banking Commission.
China’s chilly stance toward cryptocurrency goes back years. While the country doesn’t completely ban cryptos, regulators in 2013 declared that bitcoin was not a real currency and forbade financial and payment institutions from transacting with it. At the time, they cited the risk that bitcoin could be used for money laundering, as well as the need to “maintain financial stability” and “protect the yuan’s status as a fiat currency.”
Members of the public can hold or trade cryptocurrencies, but major exchanges in mainland China have been shut down. Authorities in 2017 also banned initial coin offerings, a way for tech startups to raise money by issuing crypto tokens to the public.
Still, it shows that China isn’t changing its tack on crypto anytime soon — and that seemed to be enough to worry traders.
“The Chinese position on cryptocurrencies is clear from the beginning: trading and usage of cryptocurrencies are simply forbidden,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote, in a Wednesday research note. “Therefore, the news is nothing ‘new’, but given that crypto traders are too sensitive to negative news nowadays, it adds to the downside pressure on cryptocurrencies.”
Even before the latest announcement from China, Tesla’s Musk had already sent crypto markets on a wild ride.
Even so, the two cryptos are still astronomically higher than they were a year ago. Bitcoin is up more than 30% in the year to date, according to Coindesk, while Ethereum and Dogecoin have rallied more than 255% and more than 7,500%, respectively.
—Anneken Tappe contributed to this report.