The Communist Party of China announced Wednesday (May 19) a ban on cryptocurrency business for financial institutions and payment agencies, but retail traders, miners and even cryptocurrency finance companies believe that Beijing is barking hard and biting softly.
The People’s Bank of China in Beijing. (AFP/TEH ENG KOON)
The announcement by Communist Party of China authorities on Wednesday that financial institutions and payment institutions were banned from conducting business in cryptocurrencies such as bitcoin further fueled the day’s sell-off in the cryptocurrency market, causing about a trillion dollars in market capitalization to evaporate in a single day.
But media reports said both retail traders, miners and even cryptocurrency finance companies interviewed and market performance suggested Beijing was barking hard and biting lightly.
Reuters reported on Thursday (20) that cryptocurrencies were still available for purchase in China on Thursday, while mining-related investment schemes were still operating, and that the market did not appear to have any concerns about the Communist Party authorities’ policy of banning trading.
Bobby Lee, founder and CEO of cryptocurrency wallet app Ballet, believes that perhaps the Communist authorities’ announcement is an attempt by regulators to protect retail investors from market volatility, but the ability of banks to identify transactions related to cryptocurrencies will be a challenge.
“If you look at banking activity within China, there are millions, if not billions, of transactions happening every day. How many of all those transactions …… are actually cryptocurrency services, or are they catering or e-commerce? There is no way to know.” Li Qiyuan said. He is also the former CEO of Bitcoin China.
This is not the first time Communist authorities have banned financial and payment services related to cryptocurrencies. Beijing issued similar bans in 2013 and 2017, with Wednesday’s latest ban simply expanding the scope of banned services.
Reuters reported that Chinese individuals could still buy bitcoin and other cryptocurrencies on Thursday and trade them on overseas cryptocurrency exchanges such as Binance. Purchases are made using yuan that can be paid for through banks or online payment platforms commonly used on the over-the-counter market.
Mr. Li, who sells cryptocurrencies on behalf of miners, said, “If you have bitcoin or ethereum you want to sell and I want to buy it, then I can send you money directly through the bank. Just don’t write bitcoin or ethereum or anything like that.”
“Of course, banks have internal risk management. If the volume of transactions is too large, you could get caught.” He said. He would not give his full name because of the sensitivity of the issue.
Many Chinese investors are now trading on platforms owned by Chinese exchanges that have moved overseas, including Huobi and OuYi (OKEx). Meanwhile, once-silent trading rooms on Chinese social media are also coming back to life as the country’s cryptocurrency OTC market becomes busy again.
China-focused exchanges also include Binance and MXC, which allow Chinese individuals to open accounts online, a process that takes only a few minutes. They also facilitate peer-to-peer (P2P) transactions on the over-the-counter market, helping to convert yuan into cryptocurrency. Such transactions are conducted through banks or online payment methods such as Alipay and WeChat Pay.
Retail investors also buy “computing power” from cryptocurrency miners, who devise various investment strategies that promise fast and lucrative returns.
On Thursday, the report said, such schemes continued to be listed for sale online despite new regulations banning cryptocurrency-related investment products.
For example: one crypto investment opportunity for retail investors – the ability to buy the computing power of miners of the smaller cryptocurrency Filecoin and quadruple their investment returns in three years, a platform that has seen a surge in popularity in China – was still accepting funding.
Flex Yang, chief executive of cryptocurrency financing firm Babel Finance, remains bullish on bitcoin.
He said the price of bitcoin fell more than 50% last March, but eventually bounced back to new all-time highs.
“In the long run, bitcoin is still an excellent asset class for portfolio managers looking for growth.” He added.
In response to this ban by the Chinese Communist authorities, the Hong Kong Bitcoin Association has tweeted, “For those new to bitcoin, it is customary for the People’s Bank of China to ban bitcoin trading at least once during a bull market cycle.”
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