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PBoC-Backed Internet Finance Regulatory Group Warns Against Virtual Currency, Speculation

The national self-regulatory organization for the Chinese internet finance sector has reiterated the need for institutions and individuals in the country “to strictly abide by national laws and regulatory requirements, and stay clear of virtual currency transaction activities and related speculation”.

Founded by the People’s Bank of China (PBoC) in 2015, the National Internet Finance Association (NIFA) cites what it describes as cryptocurrency exchanges “carrying out exaggerated publicity to grab investors’ attention” as a reason for its Risk Alert Against the Hype of Overseas Virtual Currency Exchanges statement.

The claim is linked to the recent March 12 global economy crash which did not spare any asset from a sell-off triggered by the Coronavirus outbreak that racked global markets. The price of the top cryptocurrency by market cap, Bitcoin, got rattled down by more than 25% to push it below the $5000 range and it lost about $40 bln over a 24-hour period making March 12 its worst one-day sell-off in seven years. The drop raised doubts about Bitcoin – its immunity to market forces, correlation as an asset meant for a crisis – and also revived the debate over its safe-haven status with parties torn between whether or not traders created volatility on top of Bitcoin’s base price to erode its hedge attribute.

“For example, against the backdrop of current turbulence of financial markets, virtual currencies are hyped as “safer hedge assets than gold and silver” by some exchanges, whereas in reality plummet in virtual currency prices caused dramatic economic losses to many investors,” NIFA claims. “What’s worse, some exchanges faked their prosperity by increasing traffic with bots software, or tampering with transaction data, etc. NIFA ran sample analysis on transactions of some exchanges. It turns out that turnover ratio for more than 40 virtual currencies is over 100% and the ratio for more than 70 virtual currencies is over 50%. Some platforms resort to copying the transaction information of other exchanges to fabricate a huge transaction volume when the prices and valuations of their virtual currencies are low.”

As a result, NIFA urged those exchanges that “chose to register overseas or moved their servers abroad” to “evade regulatory crackdown” to revert to the “Notice on Guarding Against Risks of ICOs” published in 2017 by the PBoC. The notice, it says, stipulates “that virtual currency trading and ICOs are illegal financial activities, and called for nationwide rectification”.

A similar alert was issued in December when the group claimed that some individuals “have been hyping up “virtual currency” in the name of blockchain, and there has been a resurgence of ICO and “virtual currency” trading in China.”

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