China bans financial and payment institutions from cryptocurrency business

Out-Law News | 24 May 2021 | 7:51 am |

China has banned financial institutions and payment companies from offering services related to cryptocurrency trading and warned investors not to get involved in cryptocurrency trading.

Under the ban, institutions including banks and online payment companies must not provide customers any services related to cryptocurrencies including registration, trading, clearing and settlement, according to a joint statement of the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.

The institutions must not carry out exchange services between cryptocurrency and RMB and foreign currencies. They must not offer saving, trust or pledging services of cryptocurrency, nor issue financial product related to cryptocurrency, it said.

The statement underlined the risks of cryptocurrency trading, saying the prices of virtual currencies are easily manipulated, and trading contracts are not protected by Chinese law.

China closed its local cryptocurrency exchanges in 2017, which killed the speculative market that made up 90% of global bitcoin trading as Reuters reported.

Leo Xin of Pinsent Masons, the law firm behind Out-Law, said: “The content of the joint statement is not new. The statement reemphasises the regulatory attitudes addressed in the Notice on Guarding against the Risks of Bitcoin issued in 2013. Given the current market risks in cryptocurrency, it is also a reminder to the Chinese individual trader of cryptocurrency.”