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China bans financial, payment institutions from cryptocurrency business

China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions and warned investors against speculative cryptocurrency trading.

It was China’s latest attempt to contain the burgeoning digital commerce market. After the ban, such institutions, including banks and online payment channels, will not be allowed to offer their customers cryptocurrency-related services such as registration, trading, clearing and settlement, three industry associations said in a joint statement on Tuesday.

“Recently, cryptocurrency prices have skyrocketed and fallen, and speculative cryptocurrency trading has rebounded, seriously violating the security of people’s property and disrupting normal economic and financial order,” the statement said .

China has banned crypto exchanges and the first offering of coins, but has not prevented individuals from holding cryptocurrencies.

A small toy figure can be seen on representations of the virtual Bitcoin currency displayed in front of an image of the Chinese flag in this illustration image dated April 9, 2019. REUTERS / Dado Ruvic / Illustration

The institutions are not allowed to provide savings, trust or pledging services for cryptocurrency or to issue financial products in connection with cryptocurrency, the statement also said.

The moves were not Beijing’s first moves against digital currency. In 2017, China closed its local cryptocurrency exchanges, suppressing a speculative market that accounted for 90% of global bitcoin trading.

In June 2019, the People’s Bank of China issued a statement saying it would block access to all domestic and overseas cryptocurrency exchanges and websites for the first coin offering to curb all cryptocurrency trading with a ban on foreign exchange.

The statement also highlighted the risks of cryptocurrency trading. Virtual currencies are “not backed by real value,” their prices can be easily manipulated, and trade contracts are not protected by Chinese law.

The three industry associations are: the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China.

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