Chinese regulators suddenly tightened restrictions for financial institutions dealing with cryptocurrencies. The bitcoin rate dropped to multi-month lows.
The People's Bank of China (PBOC) banned financial institutions from providing cryptocurrency exchange and storage services, as well as issuing cryptocurrency-related financial products. Banks and payment companies were also advised to intensify monitoring of the cash flows involved in cryptocurrency trading. The regulator also noted that virtual currencies should not be used as investment objects by trusts and funds.
“Recently, cryptocurrency 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,” they said in the statement.
Following the NBK, three Chinese financial associations, the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China, issued a joint directive ordering their members not to offer any cryptocurrency-related services such as account opening, registration, trading, clearing, and insurance.
Reports of tighter crypto regulation in China provoked a panic sell in the cryptocurrency market. For the first time since February, the bitcoin price dropped to $33,500. The coin is currently trading at $36,800.
It is not the first time that China provokes a fall in the crypto market. In September 2017, China banned initial coin offerings (ICOs), explaining its decision to protect retail investors and reduce financial risks. The ban also affected crypto trading platforms, which were no longer allowed to conduct fiat/cryptocurrency exchanges. The restrictions prompted most Chinese crypto exchanges to either shut down or move their headquarters to other jurisdictions.
Hong Kong Bitcoin Association commented on the new ban of the Chinese regulator: “For those new to bitcoin, it is customary for the People’s Bank of China to ban bitcoin at least once in a bull cycle.”