China’s central bank tells banks, institutions to cut cryptocurrency payment links

China’s central bank on Monday held talks with a number of Chinese banks and payment institutions with regard to cryptocurrency trading speculation, asking them to screen the capital accounts of cryptocurrency exchanges and over-the-counter dealers and cut relevant payment links, in what is said to be a thorough clean-up of cryptocurrency transactions in the country.

In a statement, the People’s Bank of China (PBC) reiterated that no banks or banking institutions are allowed to provide products or services like registration, transactions or accounts for individuals who engage in cryptocurrency trading.

The banks are also required to enhance capabilities to check their clients’ accounts through methods such as analyzing the characteristics of capital transactions in cryptocurrency speculation, to make sure that their clients can’t engage in such investment.

The banks and institutions attended the talk include the Agricultural Bank of China, China Construction Bank and Alipay, according to the PBC statement. The banks said that they will abide by the PBC’s instructions to shun cryptocurrency transactions and help cut relevant capital channels.

Some banks quickly rolled out statements on Monday, stressing prohibition of cryptocurrency transactions.

The Agricultural Bank of China, for example, rolled out a statement on Monday banning Chinese institutions and individuals from engaging in cryptocurrency financing and trading using the bank’s accounts, products or services.

The China Construction Bank and other banks and institutions also made similar moves.

China’s move to block cryptocurrency transactions’ capital channels came at a time when such dealings have flared up again, following previous crackdowns in 2017, attracting a lot of private capital that threatens to the country’s real economy, experts noted.

Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times that new transaction channels had emerged in China related to cryptocurrencies in recent years with the development of the internet, while relevant industries like Bitcoin mining also reached an “alarming” size.

“It’s time for the government to block such transactions from capital sources, so that money will stop flowing from real industries to those transactions,” Dong said.

The latest crackdown on cryptocurrencies in China also came as many countries and governments changed their stances about cryptocurrencies, after news of hackers blackmailing multinationals with Bitcoin payments raised alarms around the world.

“Many Chinese local governments had a somewhat vague attitude toward cryptocurrency transactions in recent years, creating some loopholes, but now the government has shown a firm stance that those virtual currencies are prohibited in the country,” Dong Dengxin, director of the Finance and Securities Institute of Wuhan University told the Global Times.

Chinese regulatory authorities imposed a ban on initial coin offerings, a cryptocurrency-based fundraising process, and termed it illegal in China in September 2017.

Chinese regulators have also been stepping up a crackdown on cryptocurrency mining operations in the country, with major mining hubs such as Southwest China’s Sichuan Province shutting down mines. Over 90 percent of China’s cryptocurrency mining capacity is expected to be shut down, according to experts.