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China doubles down efforts on virtual currency regulation

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China has enhanced supervision over virtual currencies to further fend off financial risks and forestall speculation in virtual currency businesses.

Bitcoin mining and trading-related activities will be cracked down upon, according to a statement from a meeting held last week by the financial stability and development committee under the State Council.

The meeting also stressed lowering credit risks and strengthening regulations on financial activities of platform enterprises.

The statement came days after three Chinese industrial associations vowed tougher restrictions on virtual currency trading.

Moreover, the statement is widely regarded as an escalation of China’s virtual currency regulation, as the targets for supervision have expanded from bitcoin trading to mining. This escalation is conducive to the crackdowns on hype of virtual currency transactions from the root.

Financial institution members, payment institutions and other agencies shall not use virtual currency to price products or services, read an announcement of Chinese industrial associations of internet finance, banking, and payment and clearing.

Also, internet platform enterprises shall not provide services for virtual currency-related business activities.
It is also not allowed to underwrite insurance businesses related to virtual currencies or bring virtual currencies into insurance liability coverage, according to the announcement.

Virtual currency, a type of specific virtual goods represented by bitcoin, has no monetary properties. For example, it has no legal tender status, said Dong Ximiao, chief researcher with Merchants Union Consumer Finance Company Limited.

Participating in illegal bitcoin trading and speculation activities may lead to huge property losses for investors and affect China’s financial stability and social order, Dong said, adding that such activities must be rectified.

The crackdown on bitcoin mining was good news for climate activists, who have voiced concerns over the potential for the energy-hungry cryptocurrency mining industry to disrupt international efforts to rein in global warming.

Bitcoin and other cryptocurrencies are created or “mined” by high-powered computers competing to solve complex mathematical puzzles, which guzzle energy and fuel planet-warming emissions unless they consume electricity from renewable sources.

Beijing’s recent move has paralysed the Chinese industry – accounting for more than half of global cryptocurrency production – making it far more difficult for individuals in China to trade the digital coins.

However, by cutting off access to China’s power grid, with its plentiful supply of affordable renewable energy, the new restrictions could push miners towards dirtier sources of electricity, warned Pete Howson, a senior lecturer in international development at Northumbria University in Britain.

 

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