In a blow to those that had hoped that China might relax its stance of cryptocurrency, the People’s Bank of China published an article yesterday entitled “Effectively Strengthening Virtual Currency Supervision to Firmly Maintain National Currency Issuing Rights”, according to a report in The Beijing News.
The People’s Bank of China recently appointed a new governor, and some speculated that Yi Gang might let the cryptocurrency industry off the hook a bit. However the article, written by Wang Xin, director of the central bank’s Currency Bullion Bureau, largely reiterates the longstanding official opinion of the government.
‘Financial instability has caused great harm’
Specifically, the article states that the central bank does not consider virtual currency to be real currency and that effective measures need be taken to effectively strengthen monitoring and supervision of all types of virtual currencies.
Wang said that fully half of Bitcoin use is related to illegal activity, calling it “divorced” from financial supervision, according to West Money. He cited the fact that hackers nowadays typically demand payment in cryptocurrency. “The amount of money involved ranged from several hundred million yuan to several billion yuan,” he wrote.
He said that criminals can “easily” set up their own trading venues and declare themselves agents, allowing them to invest in foreign entities and raise money through initial coin offerings.
Wang said: “Some cross-platform operations, Internet credits that are universally accepted in local areas, and decentralized crypto tokens such as Bitcoin are separated from the real economy and are used in the name of digital economy, blockchain technology, etc., for money laundering and terror…If you let go, you will be in control of the national currency circulation order and financial consumers’ legal rights. Financial instability has caused great harm.”
Here he is referring to the fact that cryptocurrency is often used to bypass domestic supervision, one purpose of which is to make overseas transactions.
The article reiterated that the yuan cannot be exchanged with digital currency, a rehash of an earlier edict which has made the yuan disappear from a market in which it was once completely dominant. It also repeated that foreign transactions to cryptocurrency venues in foreign countries should be blocked.
‘Disciplinary efforts should be enhanced’
What could be more ominous for Chinese citizens that illegally use cryptocurrency is the following statement:
“First, on the basis of clarifying the applicability of the law concerning the management of encrypted tokens, laws and regulations on the management of encrypted tokens should be formulated as soon as possible, and punishment standards and disciplinary efforts should be enhanced to strengthen the role of deterrence. The second is to use technical means to strengthen information monitoring, organize large-scale social software providers to carry out monitoring work, investigate, discover, clean-up and disband encrypted token transaction groups and public numbers, and hand over relevant clues to the public security organs for disposal.”