China is one of the largest bitcoin mining regions, and the yuan once accounted for 90% of bitcoin transactions. (MARTIN BUREAU/AFP via Getty Images)
The Chinese Communist Party announced on the 19th that it would ban financial institutions from offering cryptocurrency trading and other related services. China is one of the largest mining regions for bitcoin, and the yuan used to account for 90% of bitcoin trading volume. The main reason for this, according to scholars, is that the Chinese Communist Party has adopted capital controls, and opening up cryptocurrencies will become a breakthrough for capital outflows.
On social media, the People’s Bank of China released a joint statement from the China Internet Finance Association, the China Banking Association and the China Payment Clearing Association, which stated that Chinese financial institutions and payment institutions are legally prohibited from providing virtual currency services to their customers, as well as financial products related to virtual currency.
They also warned consumers not to participate in virtual currency trading speculation activities, adding that virtual currency trading contracts are not protected by Chinese law.
Cryptocurrencies are prevalent in China, and in the case of Bitcoin, one survey noted that China is the country with the most Bitcoin mining volume in the world, accounting for 75% of the world’s total. In addition, China used to account for about 90% of the world’s bitcoin trading volume.
This official statement from the Chinese Communist Party is seen as a ban on cryptocurrencies like Bitcoin, and has caused the price of Bitcoin to fall hard, at one point dropping to $39,240, the lowest point since early February.
As for why the Chinese Communist Party officially released this new measure, Cai Mingfang, a full-time associate professor in the Department of Economics at Tamkang University, pointed out in an interview that the Chinese Communist Party officially made people feel very advanced, but before this ban on cryptocurrencies, it had already offered strict financial controls to Jack Ma’s Ant Financial Services, and one of the major reasons behind it was that it would affect the Chinese Communist Party’s control over the financial market.
Cai Mingfang said cryptocurrencies have no relation to the yuan, have a certain value in the market, can even buy Tesla’s electric cars, and unlike the normal normal remittance pipeline, can be easily traded in China and move funds to other places such as Taiwan, Southeast Asia and the U.S. “This can flash past the CCP’s control over the yuan.”
Cai Mingfang said that the Chinese Communist Party adopts a high degree of control over capital, and if cryptocurrencies are not blocked, there will be a serious break in capital control, and capital goods will flow out in a big way through cryptocurrencies.
As for whether the Chinese Communist Party is worried about the crowding-out effect with cryptocurrencies in the development of digital yuan in recent years, Cai said “not really” because the two concepts are different, he said, because cryptocurrencies are not part of the Chinese Communist Party’s legal tender and are used by investment and speculation groups.
Cai said the digital yuan is an extension of sovereignty, and the exchange rate is open to the public. However, he believes that since the digital renminbi is a currency that the CCP can hold in its hands, it is also in line with capital control guidelines and allows the CCP to trace the flow of gold, so the CCP’s attitude toward it is vastly different from that toward cryptocurrencies.
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