China’s central bank, the People’s Bank of China (PBOC), is intensifying efforts to curb speculation associated with cryptocurrency transactions, according to a report by its newly appointed Governor, Pan Gongsheng. The move is part of a broader strategy outlined in the “Report on the Financial Work of the State Council” presented at a meeting of the Standing Committee of the 14th National People’s Congress.
In the report, Governor Pan Gongsheng stressed the importance of adhering to the principle of seeking progress while maintaining stability. The PBOC aims to boost confidence in the country’s financial system, prevent risks, expand domestic demand, and support ongoing economic recovery. The highlighted areas of focus include implementing prudent monetary policy, strengthening financial supervision, deepening financial reform, and maintaining the stable operation of financial markets.
To prevent and resolve hidden financial risks, the PBOC plans to “severely crack down” on illegal financial activities and fundraising. Particularly noteworthy is the commitment to “resolutely curb the speculation of domestic virtual currency transactions.” Governor Pan Gongsheng, who assumed office in July, emphasised the need to guide and stabilise financial market behaviour and expectations while taking timely measures in response to market conditions.
The PBOC is set to continue intensifying the investigation and handling of money laundering cases, aligning with its commitment to ensuring the stability of the financial system. The regulatory efforts are in line with China’s previous crackdown on various crypto-related activities, with a notable focus on mining in 2021.
China has been actively promoting the use of its central bank digital currency (CBDC), the digital yuan, with trials already covering 26 cities. Despite the ban on crypto transactions such as trading and mining declared by the PBOC in September 2021, China remains a significant market for international cryptocurrency exchange Binance. Chinese investors traded around US$90 billion in crypto on the exchange for May 2023 alone.
Meanwhile, in Hong Kong, regulators have announced restrictions on retail access to certain “complex” digital asset products. The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) issued a joint circular updating policies on retail access to virtual asset (VA) products and services. The circular emphasised the risks posed to retail customers by certain “complex” VAs and specified that such products should only be offered to professional investors.
The regulatory move in Hong Kong follows a reported US$180 million fraud at cryptocurrency exchange JPEX in September. Authorities are tightening their stance on the industry amidst growing retail interest in digital asset products, such as exchange-traded funds (ETFs). This comes ahead of the potential approval of a spot Bitcoin ETF in the U.S. The SFC and HKMA circular now requires VA intermediaries to assess their clients’ understanding of digital asset investment and ensure they have the net worth required to cover any potential losses.