The People’s Bank of China recently released a notic on virtual currencies (like cryptocurrencies) which shook the global financial markets. This primer explains the notice and what it means for the future of virtual currencies.
What led to this notice?
PBOC says that in recent years, transactions in virtual currencies such as Bitcoin have risen significantly. Most of these transactions are being used for illegal activities such as “money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities”. China has deemed these transactions as not just a risk to private property but also national security and social stability. This has led PBOC along with many Chinese regulatory bodies to pass a notice for cleanup and rectification in this space.
What does the notice say?
The notice said that all privately issued virtual currencies are not legal tender and cannot be used as a currency in China. PBOC has also banned businesses related to virtual currencies such as buying/selling virtual currencies, exchanging virtual currencies, providing information, financing tokens and derivatives linked to virtual currencies, raising funds and so on. All the banks, financial institutions, non-banks etc cannot open bank accounts, transfer funds for virtual currency-related activities. No business should not contain words “virtual currency”, “virtual assets”, “encrypted currencies” and “encrypted assets” for attracting customers.