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China on Friday reiterated its crackdown on cryptocurrencies in the world’s second largest economy and the latest statement from the People’s Bank of China has put pressure on the broader digital-asset complex.
However, notable in this round of tough talk by the PBOC is its specific reference of bitcoin
BTCUSD,
the world’s No. 1 crypto by market value, as well as Ether
ETHUSD,
on the Ethereum blockchain, which ranks No. 2. Stablecoin Tether
USDTUSD,
the asset that is pegged to a traditional currency such as the dollar
DXY,
or euro
EURUSD,
and is considered a gateway from the fiat world to digital assets.
In a report stating that virtual currency doesn’t have the same legal status as legal currency, the PBOC calls out the three digital assets, according to a translated version of the statement.
Virtual currency doesn’t have the same legal status as legal currency. Virtual currencies such as Bitcoin, Ether, and Tether have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed accounts or similar technologies, and exist in digital form. They are not legal and should not and cannot be used as currency in the market.
The Chinese government said that it will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehavior in order to safeguard people’s properties and maintain economic, financial and social order,” intensifying China’s ongoing clampdown, including on mining bitcoin, which has weighed on crypto sentiment.
Crypto bulls pointed out that this may be one of the few times that Tether has been mentioned in China’s comments.
Tether is designed to trade one-for-one with the U.S. dollar and is one of the most popular crypto, ranking No. 4 on CoinMarketCap.com, with a market value of about $69 billion, just behind Cardano
ADAUSD,
Ether and bitcoin.
Tether, however, is not without controversy and settled a nearly two-year investigation by the New York attorney general’s office into it and the operator of the Bitfinex cryptocurrency exchange, paying a $18.5 million settlement earlier this year.
Stablecoins, broadly have drawn more scrutiny by regulators. Digital assets like Tether are seen as potential risks not just to crypto, especially if there is a run on digital assets, but also to traditional markets, a point that U.S. Treasury Secretary Janet Yellen has been exploring.
Some market participants see the latest China statements as repetitive and unlikely to leave a lasting impact on crypto.
“We’ve also seen this before from China where news of bans have been reported over the years, but it has not prevented adoption of Bitcoin and digital assets from continuing their upward trend,” wrote Freddie Williams, sales trader at the U.K. based digital-asset broker GlobalBlock, in an emailed note.
Some researchers suggest that the Chinese government is aiming to quash decentralized digital assets while it promotes the government-backed digital yuan, which was kicked off recently.
China’s digital yuan is controlled by the PBOC, which issues the new electronic money. The digitized currency is expected to give China’s government new tools to monitor both its economy and its people.
“The motives for the crypto ban are also not clear cut. Strategically, the People’s Bank of China’s pilot project of issuing a digital currency will face threats of competition from the private cryptocurrency market. By forcing a ban, it is ensuring significant adoption of the central bank’s digital currency,” wrote Ganesh Viswanath Natraj, an assistant professor of finance at Warwick Business School in the U.K.
In the summer, China announced a broad-based ban on mining bitcoin and also restricted the trading of crypto.
At last check, bitcoin was changing hands at 41,037.61, down 6%, Ether was trading down 9.4% at 2,783.38, on CoinDesk.
