The Chinese government has issued a warning against the use of cryptocurrencies.
With a new wave of cryptocurrency promotional activity underway in China, many entities have begun to use digital assets in ways the authorities say violate previous rules implemented in 2017 that banned initial coin offerings (ICOs) and other digital asset activity, The Tokenist reported.
Now, the authorities are claiming that cryptocurrency trading has resurfaced throughout the country, saying a number of companies have violated the country’s previously implemented rules, which it says are still in effect.
The agencies that jointly issued the warning on December 27 include the Beijing Local Financial Supervision and Administration Bureau, the Business Management Department of the People’s Bank of China, the Beijing Securities Regulatory Bureau, and the Beijing Banking and Insurance Regulatory Bureau.
Companies have been told to not participate in cryptocurrency trading or provide services related to cryptocurrencies. Investors have also been instructed to report any violations to the appropriate agency.
The government, however, has been actively implementing blockchain technology. The People’s Bank of China (PBoC), China’s national bank, is continuing to develop its own national digital currency – Digital Currency Electronic Payment (DCEP). The digital currency is pegged 1:1 to the yuan, China’s national currency.
DCEP is expected to launch in early 2020. China’s only legal digital currency, it was both created and sanctioned by Beijing, making it significantly different from most stablecoins. Cryptocurrencies, including Bitcoin, are not considered legal tender in China.
The Bank of China – one of the largest state-owned commercial banks in the country — issued $2.8 billion worth of bonds using blockchain technology. The bonds were used as part of small business loans and leveraged China’s own independently built private blockchain.
In addition to tokenized bonds and its own national digital currency, China wants to bring blockchain to another realm of finance: securities. Weimin Guo, chief scientist at the Bank of China, recently announced that China is developing a framework for security token offerings (STOs). Security tokens represent the integration of traditional financial securities with blockchain technology, bringing a number of new benefits to an archaic system.
Once DCEP is rolled out and operational, China will allow STOs in its jurisdiction, according to Guo. Initially, however, they will need to comply with a “strict regulatory sandbox mechanism.”