Chinese regulators on Tuesday banned financial institutions and payment companies nationwide from providing services related to cryptocurrency transactions, while warning investors against speculative cryptocurrency trading.
The new restrictions are in addition to previous bans that limited the use of Bitcoin and other cryptocurrencies in the country – the first of which dates back to 2013.
Interest in Bitcoin skyrocketed in China in 2013 following national media attention on a fundraising event as well as the founding of crypto exchange Huobi and mining hardware maker Bitmain.
But in December of the same year, China banned its banks and national stock exchanges from carrying out transactions involving the cryptocurrency.
For most of 2016, bitcoin prices rose again in China amid a weakening Yuan, but the country’s regulators stepped in again and banned initial coin offerings (ICOs) in September 2017 for protect investors and reduce financial risks.
The committee that advised on this 2017 ban expressed concern that some ICOs, which are fundraising platforms that help create and sell new crypto tokens, could be financial scams and pyramid schemes.
In the following months, leading up to January 2018, these measures reportedly led to a 65% collapse in the price of BTC, and 90% of blockchain-focused venture capital firms in China exited the market.
Then from 2019, the Chinese government also began to insist on the importance of blockchain technology, even launching plans to set up its own Central Bank Digital Currency (CBDC).
The PBoC established the Digital Currency Research Institute to conduct digital currency research and study tools such as blockchain and distributed ledger (DLT) technology to help implement the CBDC.
Now, the latest ban comes after a week of falling values for several cryptocurrencies, including Bitcoin, following a global BTC bull run.
“Recently, cryptocurrency prices have soared and fallen, and speculative cryptocurrency trading has rebounded, seriously undermining the security of people’s property and disrupting the normal economic and financial order.” , the regulators noted in a joint statement Tuesday.
The current directive could make it more difficult for people to buy cryptocurrency in China and could throw more obstacles for miners to trade cryptocurrency for yuan, but some investors say it’s part of a “bullish cycle ban” the country is enforcing on the digital currency.