Technology
Virtual currencies are subject to additional regulation.
After the central bank strengthened a prohibition on related services supplied by financial institutions, China is poised to adopt stronger measures to intensify the crackdown on illicit mining and trading of virtual currency, analysts said on Tuesday.
They believe that regulations to curb speculation on virtual currencies should be put in place before markets are affected. Following recent significant sell-offs of the world's biggest cryptocurrencies, cross-border collaboration on currency regulation may be required.
Bitcoin, the world's most popular virtual currency, was trading at $32,920 at midday on Tuesday, down over 50% from its April high.Late Monday, it fell to a two-week low of $32,350. Ether fell 13% to $1,950 on Monday before recovering some ground on Tuesday.
The major cryptocurrencies' prices plummeted after the People's Bank of China, the country's central bank, issued a statement on Monday. Commercial banks and payment platforms were encouraged to avoid providing services linked to bitcoin trading and speculation.
Five big commercial banks and Alibaba's Alipay met with central bank officials to discuss regulatory issues. According to the statement, the banks involved include the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank, the Postal Savings Bank of China, and the Industrial Bank Co Ltd.The banks and Alipay have all stated their commitment to strengthening financial transfer oversight and prohibiting various services connected to cryptocurrency trading and initial coin offerings, like as payments and settlements.
Chinese officials should take specific efforts to crack down on illicit mining and trading of virtual currencies, according to Dong Ximiao, head researcher at Merchants Union Consumer Finance.
To deal with financial institutions involved in virtual currency trade, financial authorities should work more closely with judicial departments, according to Dong. He emphasized that all bitcoin mining in the nation should be halted.International collaboration on virtual currency regulation must also be enhanced, which would need information exchange, according to Dong.
According to the central bank statement, virtual currency speculation undermines economic and financial order, increases the dangers of unlawful and criminal activities such as illicit cross-border asset transfers and money laundering, and significantly compromises the security of people's assets.
The central bank also asked financial institutions to look into and identify accounts used by virtual currency exchanges and over-the-counter dealers, as well as to cut off payment channels for virtual currency trading as soon as possible.The central bank is strengthening rules on virtual currencies, which are referred to as crypto assets rather than actual currencies, according to Yang Dong, executive dean of Renmin University of China's Blockchain Institute.
The Chinese government's efforts to compel nonbank mobile payment service providers to disclose more transaction data with regulators are yet another indicator of increased regulation of digital currencies and payment services.
According to a Fitch Ratings research report, this has been accompanied by new rules aimed at limiting private companies' acquisition of excessive amounts of personal data.
On Friday, the Sichuan province administration announced identical regulatory measures to halt cryptocurrency mining that the Inner Mongolia autonomous area had already implemented. The goal was to put a stop to bitcoin mining and trade.
Authorities will need to scale up their regulatory and supervisory capabilities as new forms of digital currencies and payment technologies reach the market, according to financial analysts. "Regulation and careful supervision are key to anchoring trust in new digital forms of money," said Tobias Adrian, financial counselor and director of the International Monetary Fund's Monetary and Capital Markets Department.
"Digital money must be regulated, designed and provided in a way that allows countries to maintain control over monetary policy, financial conditions, capital account openness and foreign exchange regimes," he added.
Digital money may become a virtual safe haven for criminals' unlawful financial activities if it is not properly regulated. He stressed the importance of putting in place a strong framework to combat money laundering and terrorism funding.
