Cryptocurrency hits its darkest hour again: central bank bans trading, local governments block mining

The blade of regulation has once again fallen from the sky, and the central bank's control over crypto asset transactions came so suddenly.

On June 21, the People's Bank of China's official website stated that it had summoned some banks and payment institutions, including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank, the Postal Savings Bank of China, the Industrial Bank and Alipay (China) Network Technology Co., Ltd., regarding the issue of banks and payment institutions providing services for virtual currency trading speculation.

The relevant departments of the People's Bank of China pointed out that virtual currency trading speculation activities disrupt the normal order of the economy and finance, and breed risks of illegal cross-border transfer of assets, money laundering and other illegal and criminal activities. The central bank clearly pointed out that it is necessary to "improve the abnormal transaction monitoring model and effectively improve the monitoring and identification capabilities" and "resolutely cut off the capital payment link of virtual currency trading speculation activities."

Subsequently, the Industrial and Commercial Bank of China, China Construction Bank, Alipay and other institutions successively issued the "Statement on Prohibition of Using Our Bank's Services to Conduct Virtual Currency Transactions". Various signs may indicate that the supervision of virtual currency speculation is already in place.

Rhythm News has been regulated and "screen-swiped"

In recent days, virtual currencies such as Bitcoin have been falling for several consecutive days. According to CoinMarketCap data, as of 18:00 this afternoon, Bitcoin is currently trading at $33,236, down 5.07% in 24 hours and 15% in 7 days, which is half of its previous historical high.

Central media voiced criticism, and mainstream media frequently published articles

On May 21, the Financial Stability and Development Committee of the State Council (hereinafter referred to as the Financial Committee) held its 51st meeting to study and deploy key tasks in the financial field in the next stage. The official document stated that it would crack down on Bitcoin mining and trading, and resolutely prevent individual risks from being transmitted to the social field. This is the first time that the State Council has clearly stated that it will crack down on virtual currency mining.

Previously, the voice of "regulation is coming" was rampant, and once the news came out, regulation finally landed. Subsequently, the mainstream media continued to speak out. Last month, Xinhua News Agency published 6 articles in 10 days to keep a close eye on the "cryptocurrency circle", from mining to trading to financing, involving mining, trading, "coin issuance", carbon emissions and many other fields, which attracted widespread attention.

At the end of May, the Securities Times published an article titled "Bitcoin mining runs counter to the "carbon peak" goal", criticizing the carbon emissions and energy issues generated by the "mining" process. This is not the only mainstream media to report on this matter, and other media have also reported on similar topics. The energy issue of Bitcoin has long been a concern in the industry.

In fact, the industry has long been committed to solving the carbon emission problem, and the use of clean energy in mining is not uncommon. After Musk suspended Tesla's Bitcoin payment function, the issue of Bitcoin energy consumption also became a hot topic in the industry. The mining industry has begun to discuss the energy and environmental issues of mining on a large scale, trying to completely change the outside world's prejudice against the mining industry.

Mining industry suffers a heavy blow, Bitcoin completes "de-Chinaization"

Along with public opinion, there are also regulatory policies targeting mining farms.

In terms of supervision, China's State Council and several local governments have made clear statements that they will crack down on Bitcoin mining. Some regions have already begun to clear out Bitcoin mines, further accelerating the "de-Sinicization" of Bitcoin's computing power.

On May 18, the Inner Mongolia Autonomous Region Development and Reform Commission issued the "Notice on the Establishment of a Reporting Platform for Virtual Currency "Mining" Enterprises", and Inner Mongolia fired the first shot. On the evening of the 25th, the "Eight Measures of the Inner Mongolia Autonomous Region Development and Reform Commission on Resolutely Cracking Down on and Punishing Virtual Currency "Mining" Behavior (Draft for Comments)" was subsequently issued, requiring a comprehensive cleanup and closure of virtual currency "mining" projects.

After the large-scale withdrawal in Inner Mongolia, Xinjiang, Qinghai, and Yunnan successively introduced regulatory measures, and miners from all over the country began to "migrate". Until June 18, the "Notice of the Sichuan Provincial Development and Reform Commission and the Sichuan Provincial Energy Bureau on the Cleaning and Shutdown of Virtual Currency "Mining" Projects" completely cut off the hopes of Chinese miners, and the last shoe of the crackdown on mining also fell.

Since then, Chinese Bitcoin miners have faced the most severe challenge in history. Apart from seeking to go overseas and relocate the mines, there seems to be no other way to keep the mines running, and miners have entered an era of wandering. Since then, all Chinese Bitcoin mines have been shut down. The blockchain is still running, but in theory, no Bitcoin is produced in China anymore. China's computing power, which once accounted for more than 70% of the total computing power of the Bitcoin network, has completely disappeared from the map.

Supervision is implemented and transactions are continuously cracked down

The implementation of this regulation was already expected by many people in the cryptocurrency circle.

Some people believe that this central bank regulation may be the implementation of the 51st meeting of the Financial Committee, and is not an unexpected black swan. Previously, after the Financial Committee meeting, financial institutions did not come up with specific implementation methods.

In early June, following the crackdown on mining, search engines such as Baidu and Sogou, and social media such as Zhihu and Weibo have successively blocked keywords for virtual currency trading platforms. On Weibo, a large number of self-media big Vs in the fields of Bitcoin and cryptocurrency have been banned one after another. Clicking on their homepages shows that "the account is now unavailable due to complaints of violating laws and regulations and relevant provisions of the Weibo Community Convention."

On June 9, the Payment and Clearing Association of China, a subsidiary of the central bank, issued a risk warning to the entire industry, "Beware of the use of virtual currency and blockchain technology to evade fund tracing." "All member units should conduct full-process risk management in all links before, during and after the event."

On June 10, media reported that under the unified command of the Office of the Inter-ministerial Joint Conference on Combating and Managing New Telecom Network Crimes, the public security organs of 23 provinces, autonomous regions and municipalities simultaneously closed the net. They carried out concentrated arrests of criminal gangs that used virtual currency to provide transfer and money laundering services for telecommunications network fraud activities. In total, more than 170 criminal gangs were destroyed and more than 1,100 criminal suspects were arrested.

Under a series of regulatory policies covering multiple areas, it is not unexpected that financial institutions supervise funding channels.

This is not the first time that relevant departments have made regulations on virtual currencies. In the more than ten years of development history of cryptocurrency, regulation has occurred from time to time.

As early as 2017, seven ministries and commissions issued a document stating that it is necessary to accurately understand the essential attributes of token issuance and financing activities. Token issuance and financing is essentially an act of illegal public financing without approval, and is suspected of illegal issuance of token tickets, illegal issuance of securities, illegal fundraising, financial fraud, pyramid schemes and other illegal and criminal activities.

In August 2018, five ministries and commissions jointly issued a "Risk Warning on Preventing Illegal Fundraising in the Name of "Virtual Currency" and "Blockchain". The document stated that the general public should look at blockchain rationally, not blindly believe in exaggerated promises, establish correct monetary concepts and investment ideas, and effectively improve risk awareness.

For Bitcoin, mining belongs to the primary market and trading belongs to the secondary market. This round of regulation covers both the primary and secondary markets, which has exceeded the previous regulatory scope. Compared with the "September 4th" four years ago, the "June 21st" in 2021 seems to be more severe. The darkest moment of cryptocurrency has come again.