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Chinese Agency: Bitcoin Exchanges Lack ‘Legal’ Basis; Ban to Follow?

Last Updated March 4, 2021 4:59 PM
Josiah Wilmoth
Last Updated March 4, 2021 4:59 PM

The National Internet Finance Association of China (NIFA) has issued a statement condemning bitcoin and other cryptocurrencies as a tool for illegal activities. Claiming that Chinese bitcoin exchanges have no legal foundation to operate within the country, the agency warns its members against operating or using cryptocurrency exchanges.

NIFA: Bitcoin Exchanges Lack ‘Legal’ Basis

The self-regulatory agency, which was established by the People’s Bank of China (PBoC), stated that the “financial and social risks [of bitcoin exchanges] cannot be ignored.”

According to a rough translation of the NIFA statement, the agency alleges that investors incur financial losses because they “blindly follow the trend of speculation”and fail to understand that cryptocurrencies “lack a clear basis”for their valuation.

The statement further claims that it is “noteworthy”that cryptocurrency “is becoming a tool for money laundering” and other illegal activity:

It is noteworthy that the so-called “virtual currency” is becoming a tool for money laundering, drug trafficking, smuggling, illegal fund-raising and other criminal activities, investors should be vigilant and found that criminal clues should be reported immediately.

The statement concludes by warning NIFA members to follow the national laws. Ominously, the agency suggests that this obligation prohibits them from operating or interacting with centralized bitcoin exchanges.

China Internet Finance Association calls on: Member units should fulfill their commitment to industry self-regulatory conventions, strictly abide by national laws and regulations, do not participate in any of the so-called “virtual currency” related to the concentration of transactions or services for such transactions, take the initiative to resist any illegal Illegal financial activities.

Is a PBoC Bitcoin Exchange Ban Imminent?

That an agency with ties to the PBoC would issue such a bold statement about bitcoin exchanges should be viewed as an ominous sign. Two weeks ago, NIFA published a similar declaration about initial coin offerings (ICOs). A week later, the PBoC ruled that ICOs are illegal activities. Rumors have been swirling for the past week that regulators will shutter bitcoin exchanges, and industry leaders have revealed that credible–though unnamed–sources have privately confirmed the rumors are true.

This regulatory uncertainty has caused the markets to careen downwards. Within the past 24 hours, both bitcoin and ethereum have reached September lows.

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