The “Three Associations” Reaffirm Virtual Currency Regulation A New Round of Cryptocurrency Consolidation May Be Coming?

Why is this joint announcement not issued by the regulator but by the three associations?

The "Three Associations" Reaffirm Virtual Currency Regulation A New Round of Cryptocurrency Consolidation May Be Coming?

In the evening of the 18th, the China Internet Finance Association, China Banking Association and China Payment Clearing Association issued the Announcement on Preventing the Risk of Speculation in Virtual Currency Transactions, reiterating that virtual currencies such as Bitcoin are a specific virtual commodity that should not and cannot be used as currency in circulation in the market. At the same time, financial institutions, payment institutions and other members are required not to conduct business related to virtual currencies.

As a result of this news, cryptocurrency prices fell in response, with bitcoin prices dropping from $45,600 to near $42,000.

Several interviewees analyzed to the KCI Daily that the announcement of three heavyweight associations to prevent the risk of speculation could potentially cut off the infrastructure for domestic residents’ frequent virtual coin transactions, and play a positive control role in controlling mainland residents’ speculation in coins. It also shows that for several years, China’s regulatory attitude towards strict restrictions on virtual currencies remains clear, and another industry consolidation may be coming.

Reaffirming the regulatory attitude of virtual currencies
The announcement of the three associations clearly points out that financial institutions, payment institutions and other members should effectively enhance their social responsibility, not to use virtual currencies to price their products and services, not to underwrite insurance business related to virtual currencies or include virtual currencies in the scope of insurance liabilities, and not to provide other services related to virtual currencies directly or indirectly for their customers, including but not limited to

Providing customers with virtual currency registration, trading, clearing and settlement services; accepting virtual currency or using virtual currency as a payment and settlement tool; carrying out exchange services between virtual currency and RMB and foreign currencies; carrying out storage, custody and mortgage of virtual currency; issuing financial products related to virtual currency; using virtual currency as the investment underlying of trusts, funds and other investments, etc. In China, there are two documents that clarify the regulation of virtual currencies. Previously, the Central Bank and other ministries and commissions had issued the Notice on Preventing the Risk of Bitcoin and the Announcement on Preventing the Risk of Token Issuance and Financing in 2013 and 2017, respectively, to clarify that virtual currency trading and token issuance and financing platforms are suspected of illegal issuance of securities and illegal fund raising.

Xiao Za, a partner of Beijing Dacheng Law Firm, told the reporter of Science and Technology Board Daily that although the above two documents do not stipulate that it is illegal for individual citizens of China to hold bitcoin, the frequent trading of bitcoin and fiat currency has seriously affected the order of economic management, and the operation of non-mainstream digital currency has also put the property rights of ordinary people under threat, so it is necessary to intervene in a timely manner to prevent the overheated speculation of coins from causing the collapse of coin prices and triggering group The announcement was made by the regulator.

Why is this joint announcement not issued by the regulator but by the three associations?

In this regard, Xiao Za pointed out that the coin circle itself is a gray industry, there is no so-called regulatory authority, the association is an industry self-regulatory organization, its announcement or statement, although it does not have legal effect, but has important reference significance, reiterating China’s regulatory attitude towards virtual currency.

Especially in the civil judgment, the announcement of the association will be cited as “industry practice”, so it is foreseeable that in the future, virtual currency-related cases will be affected by this announcement. Once again, the association’s announcement is a precautionary shot to let the public know the illegality of virtual coin speculation, and if things get better, then it will stop; if things get worse, the relevant hard law will come on the scene.

A new round of consolidation in the cryptocurrency world may be coming?
Since the second half of 2020, the price of bitcoin has risen from a low of $3,800 to a high of $64,000, which has started a so-called “bull market” in the virtual currency market. This has also caused a rebound in the domestic “coin speculation culture”, and even in some related criminal cases, there are a large number of crimes of organizing pyramid schemes, which seriously affects the social management order, involves many people, involves a particularly large amount of money, and the social danger is obvious.

The KCI Daily reporter found that there are currently fiat currency trading areas on trading platforms such as OKEx, Houbi and Binance, where users can directly buy virtual currencies such as bitcoin through OTC forms, bound bank cards, WeChat, Alipay, etc.

After “94” in 2017, China’s policy prohibits direct RMB trading on exchanges, so each exchange set up a fiat OTC trading area, similar to Taobao’s C2C platform, where users trade with each other, and the platform acts as a guarantor.

The specific process is that buyers want to buy virtual digital currency, the platform will “introduce” all sellers who want to sell virtual digital currency to buyers, buyers will transfer legal tender to sellers offline through banks or WeChat or Alipay, online sellers will confirm with the trading platform after receiving the money, after confirming the trading platform will put the sellers’ virtual After the confirmation, the trading platform will put the seller’s virtual currency into the buyer’s “wallet”, and a fiat currency transaction will end here.

The joint announcement from the three associations had an immediate impact. 18 evening, a wallet service provider “Bite” quickly announced the shutdown of OTC trading and coin trading.

A few days ago, on April 22, CITIC Bank announced that no institution or individual may use the Bank’s account to top up or withdraw transaction funds, buy or sell Bitcoin and Wright-related transaction top-up codes, or transfer related transaction funds through our bank account. Once discovered, it has the right to take measures such as suspending relevant account transactions and canceling relevant accounts.

The joint announcement of the three associations also reminded the majority of consumers to enhance risk awareness, establish the correct investment concept, do not participate in virtual currency trading speculation activities, beware of personal property and rights and interests are damaged. They should cherish their personal bank accounts and not use them for top-up and withdrawal of virtual currency accounts, purchase and sale of relevant transaction top-up codes and transfer of relevant transaction funds, to prevent illegal use and leakage of personal information.

From the recent market trend, the price of cryptocurrencies has tumbled many times due to Musk and other people’s “bandwagon” comments. Cai Kelong, a senior researcher at the Institute of Financial Technology of Renmin University of China, said in an interview with Science and Technology Board Daily that this shows that the crypto market is still in an immature stage and regulation will be more urgent. .

It is also true that since April, a number of countries, including the United States, India, Turkey and South Korea, have been imposing stricter regulations on cryptocurrency trading.

Last Monday, the MAS said that investing in cryptocurrencies is risky and not suitable for retail investors. The HKMA will continue to monitor the development of the cryptocurrency space and will regularly review the adequacy and appropriateness of its own regulations.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-three-associations-reaffirm-virtual-currency-regulation-a-new-round-of-cryptocurrency-consolidation-may-be-coming/
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