China Calls Crypto Transactions “Illegal”, Drafts Rules To Boost Yuan’s Global Use
China is not relenting in its effort to get the yuan well known in other parts of the world. It continues with the yuan’s internationalization approach even as the country pushes a planned public roll out of the digital version of the currency by next year while also clamping down on crypto-related activities within its borders at the same time.
The crypto clamp down is to safeguard the country from financial risks, Chinese authorities had said some months back. The latest comes in the form of a joint statement by the People’s Bank of China (PBoC) and ten Chinese government agencies including banking, securities and foreign exchange regulators.
The PBoC announced on Friday a set of new measures including the establishment of departmental coordination that will coordinate and promote the overall implementation of efforts aimed at “the further prevention and disposal of virtual currency transactions” which are deemed as “speculation risk.”
It could also be deduced from the statement issued as a highlight of their meeting that the group of agencies agreed to work closely to maintain a “high-pressure” clampdown on trading of cryptocurrencies and to root out “illegal” activity and banning crypto mining nationwide.
“Combating the speculation of virtual currency transactions is an important decision-making and deployment made by the CPC central committee and the state council, and an inevitable requirement for implementing the concept of people-centered development and the overall security concept of the country,” an excerpt of the rough translation of the PBoC announcement says. It adds that all departments and regions will implement the new measures to dynamically monitor and timely dispose of related risks
The new measures are merely reiterating the message from a May stern warning issued after China’s State Council met to discuss various issues including crypto mining in China. So much changed in China afterwards, including the mass exodus of Chinese miners.
The PBoC announcement coincides with China’s plans to relax restrictions on domestic banks’ ability to provide yuan-denominated loans overseas, a move that Caixin has described as likely to further its strategy to boost the global use of the yuan.
The PBoC and the State Administration of Foreign Exchange made the draft of regulations released Saturday to target 27 onshore banks. The rules help set limits on the total amount of overseas loans that banks can make in yuan and foreign currencies. The rules would also help unify the regulations covering both types of lending.
The rules are meant to tighten loose ends in the financial sector especially with the Evergrande case, as China’s second largest real estate property developer, whose collapse had a great impact on the market because it’s indebted to almost 2% of China’s annual GDP.
“The regulations…aim to better meet the capital demand of overseas enterprises, effectively serve the real economy, and promote trade and investment facilitation,” a statement accompanying the draft said.
Meanwhile, regardless of the market, rising regulator interest is good for the long run particularly in 2021 when crypto has become mainstream and it’s here to stay, shares Du Jun Co-Founder, Huobi Group. He notes in a recent piece that all the recent attention-drawing activities in the crypto space “stirred regulators to act with serious intent” and their actions “are likely to be the biggest factor in shaping crypto markets in the long run.”