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Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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All You Need to Know About China’s Latest Crypto Crackdown
Bloomberg News | | Nov 27, 2019
(Bloomberg) -- China’s latest crypto-crackdown is already claiming its first casualties.
At least five local exchanges have halted operations or announced they will no longer serve domestic users this month, after regulators issued a series of warnings and notices as part of a cleanup of digital currency trading.
China’s stepping up scrutiny of its massive cryptocurrency industry just weeks after President Xi Jinping ignited a market frenzy by declaring Beijing’s support for blockchain technology. Financial watchdogs including the Chinese central bank have in past weeks ordered crypto firms to shutter and warned investors to be wary of digital currencies, seeking to rein in a market prone to excesses. Weibo, a Chinese Twitter suspended accounts operated by major exchange Binance Holdings Ltd. and blockchain platform Tron.
See: News on China cryptocurrency and more reforms
Taken together, the latest wave of shutdowns and restrictions represent the biggest cleanup of the sector since an initial Chinese clampdown in September 2017. Although exchanges that allow users to buy Bitcoin and Ether with fiat money were banned, trading had remained rampant in China through over-the-counter platforms or services that deal with crypto assets only.
“It appears that, like everything else within their borders, China feels it needs to have tighter controls on the crypto market including exchanges, miners and asset issuers,”
said Katie Talati, head of research at Arca, a Los Angeles-based asset manager that invests in cryptocurrencies.
“I do believe, however, they are moving in a similar direction as Japan and other jurisdictions that have tight and clear regulations for crypto businesses.”
“The current situation and environment for blockchain in China is still very positive,” Tron founder and crypto entrepreneur Justin Sun said. “In the short term, it may not get as much progress as we’d expect.”
See: Why China is Winning at Blockchain
Here’s a timeline of the recent developments from China that’s been blamed for the plunge:
- On Nov. 13, Binance’s Weibo account was suspended.
- On Nov. 14, the Chinese central bank’s Shanghai office and the city’s financial regulator issued a notice asking local government agencies to work with crypto-related companies under their supervision to exit such businesses immediately. On the same day, Beijing’s financial regulator published a statement warning against illegal exchange operations.
- On Nov. 15, Tron’s Weibo account was frozen.
- On Nov. 21, Shenzhen financial regulator said in a statement it’s looking into allegedly illegal crypto operations, organizing check-ups and gathering evidence.
- On Nov. 21, crypto publication the Block reported Binance’s Shanghai office was shut in a police raid. Binance disputed the report, or that it has fixed offices in China.
- On Nov. 22, the Chinese central bank’s Shanghai branch said in a statement that companies that have conducted publicity campaigns, or have offered other services to offshore crypto exchanges, have been ordered to take immediate corrective actions or exit the business.
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