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Why Does China Impose a Heavy Hammer on Virtual Currencies?

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Relevant departments have frequently issued regulatory policies for virtual currencies, and China is imposing a heavy hammer on virtual currencies:
On May 18, the China Internet Finance Association, the China Banking Association, and the China Payment and Clearing Association jointly issued an announcement on preventing the risk of virtual currency transaction speculation, requiring financial institutions, payment institutions and other member units to effectively enhance their social responsibilities and not to use virtual currencies to set prices for products and services, it is not allowed to underwrite insurance business related to virtual currency or to include virtual currency in the scope of insurance liability, and it is not allowed to directly or indirectly provide customers with other services related to virtual currency.
On June 21, the relevant department of the People’s Bank of China issued a document saying: In order to combat Bitcoin and other virtual currency transaction speculation, protect the people’s property safety, and maintain financial security and stability, the People’s Bank of China has interviewed some banks and payment institutions such as Industrial and Commercial Bank of China, Agricultural Bank, Construction Bank, Postal Savings Bank, Industrial Bank and Alipay (China) Network Technology Co., Ltd on providing services for virtual currency transaction speculation.
On July 6, the Beijing Municipal Monetary Management Bureau and the Business Management Department of the Central Bank jointly issued the "Risk Reminder on Preventing Virtual Currency Trading Activities", solemnly warning relevant institutions within their jurisdiction not to provide business premises, commercial displays, and marketing for virtual currency-related business activities publicity, paid diversion, etc.
In addition to the central government's successive heavy hammers on virtual currencies, relevant departments in Inner Mongolia, Qinghai, Xinjiang, and Yunnan Province have also issued specific implementation measures to combat virtual currency "mining". It is strictly forbidden to initiate and approve various virtual currency "mining" projects in various regions, and to completely shut down all existing virtual currency "mining" projects. At the same time, resolutely investigate and rectify the project entities that set up projects in the name of big data, supercomputer centers, etc. but are engaged in virtual currency "mining".
Why is China struggling to crack down on virtual currencies such as Bitcoin? This is mainly due to the characteristics of virtual currencies, China's financial risk prevention, and the development of digital renminbi.

Disorderly hype, outside the law

Take Bitcoin as an example. Since 2021, Bitcoin has climbed from $30,000 to a high of $64,000 in just a few months, and then fell back to more than $30,000 now. The price has fluctuated dramatically.
The virtual currency has no real value support and is a speculative asset. The financing hype is an important driving force for their ups and downs. The capital behind Bitcoin is not as simple as ordinary financial institutions and retail investors. The vast majority of Bitcoin is controlled by Jewish capital. The most famous one is Tesla CEO Musk who initially declared that it would not buy Bitcoin but finally took company funds to buy much. Goldman Sachs, Morgan, Rothschild and other consortia are all deployed.
At the same time, virtual currency has the characteristics of high anonymity and decentralization. It has become a carrier of money laundering, drug trafficking, smuggling, illegal fund-raising and other illegal and criminal activities. Not only is its transaction not protected by law, it also touches the bottom line and red line of the law. In addition, like other financial frauds, virtual currency trading platforms often run off. All kinds of altcoins other than Bitcoin are full of Ponzi schemes and all kinds of lies.
If the virtual currency is allowed to speculate and develop savagely, on one hand, China is worried that it will erode the national currency sovereignty, and on the other hand, it is also letting virtual currencies disrupt the normal domestic economic and financial order.

Prevent domestic financial risks

As mentioned above, the decentralized and anonymous characteristics of Bitcoin and other virtual currencies have become carriers of illegal and criminal activities such as money laundering, drug trafficking, smuggling, and illegal fund-raising. This is contrary to the special action that China is vigorously implementing to combat money laundering criminal activities. Virtual currency that can provide convenience for criminal activities has naturally become the target of Chinese laws and policies.
In addition, the virtual currency represented by Bitcoin does not belong to any central bank and is a "currency" issued by non-governmental organizations. Therefore, its issuer is illegal.
At present, the global economy is entering the right side of the turning point of the big cycle and is in economic recession, which has led to an intensified international economic game. For China, the current financial risks are very large. Cracking down on virtual currencies is just in line with the goal of cleaning up all potential domestic financial risks before the release of external risks and preparing for the impact of external risks in the future.

China is vigorously developing the digital renminbi

At the end of May, digital renminbi pilot activities were successively carried out in cities such as Beijing, Shanghai, and Changsha in China. Many banks began to invite customers to register for the digital renminbi APP to experience the functions of digital renminbi. In addition, from June 1st to 18th, nearly 210,000 digital renminbi sub-wallets were pushed to the JD APP, over 130,000 people used digital renminbi for consumption, and the cumulative consumption amount exceeded 21 million yuan.
This shows that China is vigorously promoting the digital renminbi system. The digital renminbi and virtual currency have the same and essential differences. The same is that both have the concept of cryptocurrency technically, and both are expressed in electronic form.
There are two main differences: First, the digital renminbi is a sovereign currency issued by the Central Bank of China, while Bitcoin is a credit structure based on split bookkeeping; the former is a centralized sovereign currency, and the latter is a decentralized transaction currency, the two are not compatible. Secondly, the encryption attributes and exclusive ownership characteristics of digital renminbi make transactions visible only to users themselves; but the currency of digital renminbi is truly traceable, which not only provides an efficient currency system, but also helps to avoid "gray operations."
The digital renminbi has already taken the lead in the world, and the rapid development of the digital renminbi is an inevitable trend in the future. The future operation of China's monetary system and monetary policy will stand at a higher level. The virtual currency headed by Bitcoin is obviously not in this list.
In fact, China is not the only one that has imposed a heavy hammer on Bitcoin-led virtual currencies. After all, for a country, if there is a bigger and bigger "financial bomb" on the side of the couch, how can you sleep peacefully?


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  • 虚拟货币有很多问题,对我国的虚拟人民币造成干扰和冲击,当然要被禁止了。


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