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It just got harder to use crypto in China

Regulators added new restrictions in a Tuesday statement, but they fell short of a ban. Bitcoin and ether prices fell.

China is cracking down on cryptocurrencies.

China is cracking down on cryptocurrencies.

Image: Andre Francois McKenzie / Protocol

Chinese authorities have long looked askance at cryptocurrency, a volatile instrument well beyond Beijing's control. On Tuesday, China pushed back yet again when three government-linked associations banned member financial institutions and payment companies from registering, trading, clearing and settling crypto transactions, according to a Reuters report.

The statement, which technically applies to "virtual currency," a broader term than "cryptocurrency," reflects Beijing's wariness of the often decentralized and highly volatile financial products. The People's Bank of China (PBOC), the central bank, has previously emphasized the importance of stability and is putting its shoulder into a nationwide rollout of its digital yuan, a government-backed currency that gives Beijing more, not less, control and visibility into who is paying whom for what.

This is not the first time Beijing has acted to make using cryptocurrency harder domestically. In late 2017, China banned initial coin offerings; in late 2019, the PBOC said it would "block access to all domestic and foreign cryptocurrency exchanges and ICO websites." Those moves, like the announcement today, have collectively made it more difficult, but not technically illegal or impossible, for individual Chinese citizens to trade cryptocurrency.

The news sent prices for major cryptocurrencies like bitcoin and ether lower in early trading. But in April, a PBOC official called bitcoin an "investment alternative," just "not a currency per se." China is also broadly bullish on blockchain, the technology underpinning many virtual currencies. Major companies like Alibaba, Tencent and Baidu have recently filed multiple patents using the term "blockchain," according to internal data collected by Protocol.

The full Chinese text of the announcement is available here.

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