China’s central bank warned several of its largest state-owned banks and Jack Ma’s Alipay to “investigate and identify” bank accounts facilitating cryptocurrency trading and block all corresponding transactions, in Beijing’s latest move against Bitcoin.
The central bank on Monday said it had called in the Agricultural Bank of China, China Construction Bank, and ICBC, as well as other payment platforms like Alipay, to discuss the problem of “providing services for cryptocurrency transaction speculation”.
The regulator called on the financial groups to identify and block all transfers to accounts held by cryptocurrency exchanges and other offshore middlemen as well as to invest in technology to ferret out any transactions linked to “cryptocurrency speculation”.
The order is part of a recent Chinese government crackdown on cryptocurrencies that began in May, as Beijing seeks to end trading and shut down the world’s biggest crypto-mining operations, which lie within its borders. Instead, the central bank wants citizens to use its own digital currency, which it has started testing in large-scale pilots.
While Chinese authorities took the first steps to ban banks from handling Bitcoin transactions as far back as 2013, and have launched several crackdowns since, they have been unable to stamp out cryptocurrency trading entirely. Industry insiders said one way Chinese remain able to get hold of Bitcoin is through peer-to-peer traders.
Leo Weese, co-founder of the Hong Kong Bitcoin Association, said that to implement the directive, authorities and banks could slowly start to trace and cut off the bank accounts peer-to-peer traders use to accept payment.
“Bitcoin trading in China will continue, but become less liquid, and spreads will increase,” said Weese. “People will limit themselves to trading with their friends and trusted friends-of-friends.”
The People’s Bank of China said trading cryptocurrency disrupts the financial system, breeds the risk of illegal cross-border asset transfers and money laundering and “seriously infringes on the security of people’s financial assets”.
As part of its strict capital control regime, China drastically limits citizens’ ability to transfer money out of the country and has watched Bitcoin warily since the cryptocurrency’s rise to popularity almost a decade ago.
Starting last month, China stepped up efforts to unwind power-hungry Bitcoin mining in the country, where about 75 per cent of the world’s mining activities took place, according to pre-crackdown estimates.
Sichuan, a hydropower-rich province in south-west China, was the latest province to order 26 of its largest local mines to stop operating last week. It followed bans from the local governments in leading cryptocurrency mining locations Xinjiang, Yunnan and Qinghai.
The northern region of Inner Mongolia even set up a hotline for residents to blow the whistle on neighbours they suspect of being cryptocurrency miners.