The ROC has prohibited its banks and companies from accepting transactions using cryptocurrencies and warned about the possible risks for those who do not comply with this standard. According to this prohibition, banks must not offer their customers any type of service in which cryptocurrencies are used. Services such as registrations, settlement, clearing, and trading were stated by three institutions in the Chinese industry: the China National Internet Financing Association, the China Banking Association, and the China Payments and Clearing Association.

In a recent statement, they indicate that the prices of cryptocurrencies have risen and fallen abruptly, and speculative trading in cryptocurrencies has recovered, which has seriously infringed the security of people’s property, disrupting the economic order and financial.

Background of the measure

China had previously prohibited (2017) from doing cryptocurrency exchanges and Initial Coin Offerings (ICO) but had not expressly prohibited people from using cryptocurrencies for their financial transactions; however, in the recent measure, it is prohibited to provide savings services, loans in cryptocurrencies, trust and issuing financial products that are related to cryptocurrencies. This new measure also highlights the risks of trading in cryptocurrencies, stating that virtual currencies have no real backing. Their prices are easily manipulated, and commercial contracts are not protected by Chinese law.

The new rule reiterates that digital currencies do not have legal protection, in such a way that, if any user suffers a financial loss due to the use of cryptocurrencies, it will be their own responsibility, in addition to the Chinese government and its official authorities (in economic matters ) cannot be held responsible for the recovery of said money.

China reiterates its stance on cryptocurrency trading

Although it seems that it is a “new prohibition” on the Chinese authorities, analysts and critics point out that this situation reaffirms the “initial position” that local authorities had, since this prohibition was in force and had already been implemented since 2017. The institutions that signed the new communiqué are doing is to remind the businesses that they should not provide basic services in cryptocurrencies to residents of the country since it is completely illegal to carry out this practice within China.

A strategy to protect yourself from external competition?

It is important to mention that this restriction is possibly due to “protecting” or supporting China’s “own initiatives,” for example. In contrast, restrictions are placed on cryptocurrencies in that country, on the other hand, tests and promoting in some cities the Digital Yuan and / CriptoYuan (promoted by the Chinese government), for which, we can conclude that the restrictions do not necessarily obey protection of the end-users, but is a way to strengthen their national projects. We must consider that this has already happened frequently, such as the ban on Facebook, Instagram, and WhatsApp in China, to defend its national equivalent, which is WeChat.

What do you think about this topic? Do you think that at some point, China will reopen to the use of cryptocurrencies?

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