China joins CBN, bans cryptocurrency transactions

China has followed Nigeria in banning crptocurrency transactions.

It also warned investors against speculative crypto trading.

The ban by China was its latest attempt to clamp down on what was a burgeoning digital trading market.

Three months after the Central Bank of Nigeria (CBN) banned banks and other key players in the financial sector from cryptocurrency transactions, China has followed suit as it restricted institutions and payment companies from providing services related to cryptocurrency transactions.

It also warned investors against speculative crypto trading.

The CBN, in February, had directed banks and other financial institutions to close any accounts dealing in cryptocurrency or facilitating payment for cryptocurrency exchange, with immediate effect.

The regulator had also directed banks to expose any individual and entity running such accounts, warning that failure to adhere to the directives would attract strict sanctions.

A Reuters report yesterday said the ban by China was its latest attempt to clamp down on what was a burgeoning digital trading market.

Under the ban, such institutions, including banks and online payments channels, must not offer clients any service involving cryptocurrencies, such as registration, trading, clearing and settlement, three industry bodies said in a joint statement.

“Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” China said in a statement.

The institutions must also not provide saving, trust or pledging services of cryptocurrency, nor issue financial product related to cryptocurrency, the statement added.

The ban was not Beijing’s first moves against digital currency. In 2017, China had shut down its local cryptocurrency exchanges, smothering a speculative market that had accounted for 90 per cent of global bitcoin trading.

In June 2019, the People’s Bank of China had issued a statement saying it would block access to all domestic and foreign cryptocurrency exchanges and Initial Coin Offering websites, aiming to clamp down on all cryptocurrency trading with a ban on foreign exchanges.

The statement also highlighted the risks of cryptocurrency trading, saying virtual currencies “are not supported by real value”, their prices are easily manipulated, and trading contracts are not protected by Chinese law.

Meanwhile, following the ban by China, Bitcoin took investors on a wild ride yesterday, plunging as much as 31 per cent before cutting the drop in half in a bout of selling that drew attention across Wall Street and social media.

The extreme volatility in an asset known for its swings caused outages on major crypto exchanges and at one point brought Bitcoin’s market value down $500 billion from its peak last month, according to Bloomberg.

The tumult elicited a tweet from Elon Musk and signalled a “capitulation” on Cathie Wood’s crypto monitors.

The coin was down 14 per cent to $37,090 as of 12:19 p.m. in New York.

It erased all the gains it clocked up following Tesla Inc.’s February 8 announcement that it would use corporate cash to buy the asset and accept it as a form of payment for its vehicles. Ether, the second-biggest coin, sank more than 40 per cent, while joke-token Dogecoin lost 45 per cent.