Local news sources from China reported recently that the People’s Bank of China, the country’s central bank, has issued a notice to payment processing companies to stop facilitating cryptocurrency exchanges.
While the document has not been released on the official website as a notice, a local publication by the name of the Economic Observer confirmed from a source at the bank, that the document is authentic and has just not been released as a notice, the source says it is an internal notification.
What does the document say?
The document in its entirety directs payment service providers within the country to go through their records and identify if any transactions are being linked to any known cryptocurrency exchanges. If they are – they were told – that they would need to stop their services to accounts that are currently being operated by cryptocurrency exchanges.
This has caused widespread worry through the remains of the once-thriving cryptocurrency exchanges in China.
The lethargic cryptocurrency industry in China
In the past couple of years, these Chinese based cryptocurrency exchanges had surprised everyone within the country with the rate that they had been growing in business.
However, it all came to an abrupt halt when the Chinese government suddenly decided to turn on the cryptocurrency industry which flourished within the country and started to take stern actions to put a stop to it.
After the government’s stringent campaign against a majority of the cryptocurrency industry in China, a campaign that comprised actions like banning initial coin offerings and shutting down regular operations of cryptocurrency exchanges.
Cryptocurrency exchanges operating in China now have minor operations that consist of over the counter transactions.
In these over-the-counter transactions, exchanges now need to ensure that Chinese currency and cryptocurrency remains separated through their execution. Buy and sell orders are handled by the traders, and if anyone needs to transfer funds, then they are sent in Chinese Yuan by using conventional payment methods such as bank transfers. WeChat Pay and AliPay are two of the most widely used payment methods in China and are methods used to facilitate such transactions.
Some cryptocurrency platforms also conduct their operations through WeChat and Telegram, but the rest of the transaction is conducted as described above.
Why this sudden action?
While the cryptocurrency industry in China is almost eradicated, recent news reports had suggested that the government is looking towards stopping what little remains of it.
Some of the actions that had been reportedly proposed within the government were to ban websites and mobile applications that allow cryptocurrency trading, as well as looking into other means to stop these exchanges and traders from continuing with their activities.
This move seems to be a part of the “other means,” as payment services play a large part in any business’ success in this day and age. If payment services are stopped for these exchanges, they will essentially be put out of business.
What will the exchanges do?
OKCoin, one of the formerly largest exchanges in China, has already expanded its operations to South Korea where the environment, while somewhat difficult, is not as actively against cryptocurrency as China has been.
If China moves forward with further developments such as this reported move and continues to take even stricter actions, remaining exchanges will also have no choice but to look to other territories to start their operations.