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China's top regulators ban crypto trading and mining, sending bitcoin tumbling

CryptocurrencySep 24, 2021 01:52PM ET
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© Reuters. FILE PHOTO: A Chinese flag is seen among representations of Bitcoin and other cryptocurrencies in this illustration picture taken June 2, 2021. REUTERS/Florence Lo/Illustration/File Photo

By Alun John, Samuel Shen and Tom Wilson

SHANGHAI/LONDON (Reuters) - China's most powerful regulators on Friday intensified a crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks.

Ten agencies, including the central bank, financial, securities and foreign exchange regulators, vowed to work together to root out "illegal" cryptocurrency activity, the first time the Beijing-based regulators have joined forces to explicitly ban all cryptocurrency-related activity.

See Explainer here https://www.reuters.com/article/crypto-currency-china-explainer/explainer-whats-new-in-chinas-crackdown-on-crypto-idUSKBN2GK1FO

China in May banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and issued similar bans in 2013 and 2017.

The repeated prohibitions highlight the challenge of closing loopholes and identifying bitcoin-related transactions, though banks and payment firms say they support the effort.

Friday's statement is the most detailed and expansive yet from the country's main regulators, underscoring Beijing's commitment to suffocating the Chinese crypto market.

"In the history of crypto market regulation in China, this is the most direct, most comprehensive regulatory framework involving the largest number of ministries," said Winston Ma, NYU Law School adjunct professor.

The move comes amid a global cryptocurrency crackdown as governments from Asia to the United States fret that privately operated highly volatile digital currencies could undermine their control of the financial and monetary systems, increase systemic risk, promote financial crime and hurt investors.

They also worry that "mining," the energy-intensive computing process through which bitcoin and other tokens are created, is hurting global environmental goals.

Chinese government agencies have repeatedly raised concerns that cryptocurrency speculation could disrupt the country's economic and financial order, one of Beijing's top priorities.

Analysts say China also sees cryptocurrencies as a threat to its sovereign digital-yuan, which is at an advanced pilot stage.

"Beijing is so hostile to economic freedom they cannot even tolerate their people participating in what is arguably the most exciting innovation in finance in decades," top U.S. Republican Senator Pat Toomey tweeted.

While U.S. regulators are closely scrutinizing digital asset risks, they have said they also offer opportunities, including to promote financial inclusion.

'SOCIAL ORDER'

The People's Bank of China (PBOC) said cryptocurrencies must not circulate and that overseas exchanges are barred from providing services to China-based investors. It also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading nationally.

The government will "resolutely clamp down on virtual currency speculation ... to safeguard people's properties and maintain economic, financial and social order", the PBOC said.

China's National Development and Reform Commission said it will work to cut off financial support and electricity supply for mining, which it said spawns risks and hampers carbon neutrality goals.

Bitcoin, the world's largest cryptocurrency, dropped more than 9% before paring those losses. It was down 6.6% at $41,937 around 12:00ET. Smaller coins, which typically mimic bitcoin, also tumbled.

China's cabinet vowed in May to crack down on bitcoin mining and trading as it sought to mitigate financial risks, without going into details, sending bitcoin tumbling 30% in a day. Friday's news dashed hopes among crypto-enthusiasts that the cabinet would fail to follow through on its threat.

"This is the manifestation of the crypto mining and trading crackdown announcement ... back in May," said NYU's Ma.

BOUNCE BACK?

The move also hit cryptocurrency and blockchain-related shares, although they clawed back some of those declines in morning U.S. trading.

U.S.-listed miners Riot Blockchain (NASDAQ:RIOT), Marathon Digital and Bit Digital slipped between 2.5% and 5%, while San Francisco crypto exchange Coinbase (NASDAQ:COIN) Global fell just over 1%.

Despite the initial shock, analysts said they did not expect the crackdown to dent global crypto-asset prices long term as companies continue to adopt crypto products and services.

The exposure of major crypto exchanges and payment companies was not immediately clear, however. Binance, the world's biggest, has been blocked in China since 2017, a spokesperson said. A spokesperson for Coinbase declined to comment. Global payment company PayPal (NASDAQ:PYPL) does not offer crypto services in China, a spokesperson said.

Crypto exchanges OKEx and Huobi, which originated in China but are now based overseas, are likely to be the worst affected since they still have some China users, analysts said. Tokens associated with the two exchanges plunged over 20%. The exchanges did not immediately respond to requests for comment.

However, the Chinese government has struggled in the past to stop internet users from evading its controls.

"China's actions haven't held back crypto's rise too much in the past so I wouldn't be surprised to see it bounce back once more," wrote Craig Erlam, an analyst at currency broker OANDA.

Virtual currency mining had been big business in China before May, accounting for more than half the world's crypto supply, but miners have been moving overseas.

"The losers in all of this are plainly the Chinese," said Christopher Bendiksen, head of research at digital asset manager CoinShares. "They will now lose around $6 billion worth of annual mining revenue, all of which will flow to the remaining global mining regions," he added, citing Kazakhstan, Russia and the United States.

China's top regulators ban crypto trading and mining, sending bitcoin tumbling
 

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Comments (80)
William Bailey
William Bailey Sep 25, 2021 4:06AM ET
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Feces flying , fan cranking ……
Jon Bal
Jon Bal Sep 25, 2021 1:31AM ET
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pro tip: borrow and spend up to your eyeballs. the Fed reserve has your back
Seluleko Khanyile
Seluleko Khanyile Sep 25, 2021 1:00AM ET
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"The gap".... when you open a window you got close it...BTCUSD bullish momentum
Ethan Strong
Ethan Strong Sep 24, 2021 10:32PM ET
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China Scuks
Rui Simoes
Rui Simoes Sep 24, 2021 5:41PM ET
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just to take attention out Evergrande
Sean Livingstone
Sean Livingstone Sep 24, 2021 3:50PM ET
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China isn't the problem. The media is the problem. They like to recycle news to steal hard earned money from the people. LOL
Riaz Ali
Riaz Ali Sep 24, 2021 2:54PM ET
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this is FUD news
Rodney Dangerfield
Rodney Dangerfield Sep 24, 2021 1:57PM ET
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I hope some of you are ready to pay your taxes on your digital currency fun.... they're watching.
Anthony Crowley
Anthony Crowley Sep 24, 2021 1:57PM ET
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The IRS calls it Operation Hidden Treasure.
Rodney Dangerfield
Rodney Dangerfield Sep 24, 2021 1:56PM ET
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I hope some of you are ready to pay your taxes on your digital currency fun.... they're watching
Alan Rice
Alan Rice Sep 24, 2021 1:23PM ET
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Worlds oldest civilization prefers "common sense". Good news !
Rohit kumar
Rohit kumar Sep 24, 2021 1:22PM ET
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how many times you want to update your artical
vic riv
vic riv Sep 24, 2021 1:18PM ET
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china now cares about the environment.... so what was all that business back when the US puts a part per million detector in their embassy and lo and behold we find out how toxic their air is.... pre Bitcoin adoption/ban
Todd Gray
Todd Gray Sep 24, 2021 1:14PM ET
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Or, there's a domino effect where other countries, rich with gold follow, and send the spot price of gold to $2500 inside a week. Hey! I'm speculating here, along with everybody else.
Deringer Deringer
Deringer Sep 24, 2021 12:27PM ET
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Its the same statement they made four years ago, they just getting antzy that no one wants the digital yuan !
perplexed76 .
perplexed76 . Sep 24, 2021 12:27PM ET
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what are you talking about? one billion people will want if the Party say. It will happen in 2022. And you will be flying to salvador to exchange your air lol
Pradeep Adhikari
Pradeep Adhikari Sep 24, 2021 12:16PM ET
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Chines are very clever, while pumping this news they accumulate more BTC on deep and try to  control on crypto market.
perplexed76 .
perplexed76 . Sep 24, 2021 12:16PM ET
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chinese are clever, they buy bonds not air
Trevor Roberts
LimitUp Sep 24, 2021 11:58AM ET
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Countries like China will make people use crypto even more, you sheep wont understand this thinking
jason xx
jason xx Sep 24, 2021 11:58AM ET
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Yes its an extremely complex and multi dimensional statement that only the brightest minds could even hope to understand.....
Trevor Roberts
LimitUp Sep 24, 2021 11:58AM ET
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jason xx Its not about being bright. You have squares like you and you have people that dont trust the gov and generally do what they want.
Trevor Roberts
LimitUp Sep 24, 2021 11:58AM ET
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You thumbs down guys go get your nails done, its Friday
Ravi Kiran
Ravi Kiran Sep 24, 2021 11:56AM ET
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India should do the same quickly. Otherwise common people will be paying huge electricity bill due extensive mining
Kristian Johansson
Kristian Johansson Sep 24, 2021 11:07AM ET
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Cryptocurrencies generally are in one massive ponzi scheme style bubble due to many reasons, one in particular - Tether (USDT). There are so many scams & shady behavior yet little to nothing has been done to stop them as the space has been largely unregulated, this will change. "Tether is a fraud on the scale of Madoff or Enron and we’re in the middle of a bubble for the history books. ... But what caused this cryptocurrency bubble? Today we’re going to dive into a core driver, and likely the largest Ponzi scheme in history." https://www.singlelunch.com/2021/05/19/the-tether-ponzi-scheme/
Tommy Rommazontz
Tommy Rommazontz Sep 24, 2021 10:52AM ET
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We all know that the communists Chinese take these actions: "in order to safeguard people's properties and maintain economic, financial and social order".
Gustavus Maramis
Gustavus Maramis Sep 24, 2021 10:19AM ET
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and hows e-RMB ? LoL
jason xx
jason xx Sep 24, 2021 10:00AM ET
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They can't ban it again after they already banned it last month. Can you get fired from the same job twice?
Mohammed Shihab AB
Mohammed Shihab AB Sep 24, 2021 10:00AM ET
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I think they like to buy the Dip, now waiting Elon to Tweet, then he will buy at 30,000 sell at 50,000 🤣🤣🤣🤣
Daniel Aizenberg
Daniel Aizenberg Sep 24, 2021 10:00AM ET
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I'm guessing they will buy the dip?
George Roshtein
George Roshtein Sep 24, 2021 10:00AM ET
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of course.. every country is doing the same. the main idea of elite is to make middle class poor as long as possible, so you are slave until the death.. china once they load will say to their citizens "after we reviewed bitcoin, now it's ok to use".. it's all legal crime.
Gershom Zvi
Gershom Zvi Sep 24, 2021 10:00AM ET
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They dont want foreign crypto only own government regulated crypto digital yuan
Millennial Metals
Millennial Metals Sep 24, 2021 9:57AM ET
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Goodbye ponzi coin
Gershom Zvi
Gershom Zvi Sep 24, 2021 9:57AM ET
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Which one ? Bitcoin, Bitcoin Gold, Bitcoin Cash, Bitcoin SV or 1000 more like Dogecoin
Steve Bucher
Steve Bucher Sep 24, 2021 9:32AM ET
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So ..... all crypto is banned except for the Chinese government e-remnimbi ? It's time to ban the Chinese dictatorial government period.
Sien Huat Hii
Sien Huat Hii Sep 24, 2021 9:22AM ET
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market makers just repeating the same old news to enter lower..
Vincenzo Tilotta
Vincenzo Tilotta Sep 24, 2021 9:22AM ET
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Exactly, this is fake news, nothing appears in the chinese or HK papers about this. Reuters simply copy pasting an old article because they want to buy bitcoin at a lower price. Unbelievable from them to publish such fake news fud
jason xx
jason xx Sep 24, 2021 9:22AM ET
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Ya W T F? They can't ban something that is already Banned??? Is this Bizarro world? I'm banning crack smoking at work.
George Roshtein
George Roshtein Sep 24, 2021 9:22AM ET
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Vincenzo Tilotta  reuters is owned by my brothers.
 
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