China is expected to issue tougher measures to intensify the crackdown on illegal mining and trading of virtual currencies, after the central bank reinforced a ban on related services provided by financial institutions, experts said on Tuesday.
Regulations to prevent speculation on virtual currencies should be implemented before markets are disrupted, they said. Cross-border cooperation on regulation of the currencies may also be needed after sharp sell-offs of the world’s major cryptocurrencies in recent days.
The price of Bitcoin, the world’s largest virtual currency, dropped to $32,920 at noon on Tuesday, down by nearly 50 percent from its peak in April. It hit a two-week low of $32,350 late on Monday. Ether also plunged by 13 percent to $1,950 before regaining some ground on Tuesday.
The price drops of the major cryptocurrencies followed a statement from the People’s Bank of China, the central bank, on Monday. It urged commercial banks and payment platforms to stop services related to cryptocurrency trade and speculative investment.
Central bank officials recently had regulatory talks with five large commercial banks and Alibaba’s Alipay. The banks are: the Industrial and Commercial Bank of China; the Agricultural Bank of China; the China Construction Bank; the Postal Savings Bank of China and the Industrial Bank Co Ltd, according to the statement.
The banks and Alipay all expressed their commitment to tightening supervision of fund transfers and forbidding some services, including payments and settlements, related to cryptocurrency trading and initial coin offerings.
Dong Ximiao, chief researcher at Merchants Union Consumer Finance, said Chinese regulators should take targeted measures to crack down on illegal mining and trading of virtual currencies.
Financial regulators should cooperate more with judicial departments to deal with financial institutions involved in virtual currency trading, said Dong. He stressed they should stop all bitcoin mining in the country.
International cooperation on regulating virtual currencies also needs to be strengthened, which will require sharing information, Dong said.
Virtual currency speculation disrupts economic and financial order, increases the risks of illegal and criminal activities, such as illicit cross-border asset transfers and money laundering, and seriously infringes on the security of people’s assets, according to the central bank statement.
The central bank also urged financial institutions to investigate and identify accounts used in virtual currency exchanges and over-the-counter traders, and promptly cut payment channels for virtual currency trading.
Yang Dong, executive dean of the Blockchain Institute of Renmin University of China, said the central bank is tightening regulations on virtual currencies, which are identified as crypto assets, instead of real currencies.
Chinese authorities’ moves to pressure nonbank mobile payment-service providers to share more transaction data with regulators is another sign of greater oversight of digital currencies and payment services.
This has been accompanied by new regulations that seek to limit private firms’ collection of excessive amounts of personal data, said a research note from Fitch Ratings.
The Sichuan provincial government announced on Friday similar regulatory measures already taken by the Inner Mongolia autonomous region to stop cryptocurrency mining. Restricting bitcoin mining and trading was targeted.
Financial analysts warned recently that as new types of digital currencies and payment innovations hit the market, authorities will need to ramp up their regulatory and supervisory capacity. “Regulation and careful supervision are key to anchoring trust in new digital forms of money,” said Tobias Adrian, financial counselor and director of the International Monetary Fund’s Monetary and Capital Markets Department.
“Digital money must be regulated, designed and provided in a way that allows countries to maintain control over monetary policy, financial conditions, capital account openness and foreign exchange regimes,” he added.
Without proper regulation, digital money could be a virtual safe haven for criminals’ illicit financial transactions. Effective implementation of a robust framework to combat money laundering and stop the financing of terrorism is needed, he said.
Origin:By CHEN JIA | CHINA DAILY |