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China Bars Financial Companies From Cryptocurrency Services

By Eric Volkman - May 19, 2021 at 8:57AM

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This isn't the country's first crackdown on Bitcoin and its ilk.

In a fresh crackdown on cryptocurrencies, China has banned financial services providers from certain offerings related to the popular but volatile asset class.

In a joint statement issued on Tuesday, the country's Banking Association, the National Internet Finance Association, and the Payment and Clearing Association prohibited such companies from providing a raft of crypto-related services. These include trading in such assets, custody, clearing and settlement, and registration.

Bitcoin symbol made up of colored spheres.

Image source: Getty Images.

The three agencies justified this by writing in their statement that "Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people's property and disrupting the normal economic and financial order."

This move wasn't expected, but it has precedent. In 2017, the country banned cryptocurrency exchanges from operating; at the time, Chinese exchanges were responsible for the vast bulk of Bitcoin (BTC -0.40%) trading.

That year, the government also declared a halt to initial coin offerings (ICOs) in the country. Similarly to this latest ruling, several government financial agencies issued a joint statement on that ban, saying that it was intended to protect investors and mitigate risk.

In 2019, the People's Bank of China went a step further, saying it was blocking the access of domestic investors to cryptocurrency exchanges and ICO sites abroad.

China's latest move against cryptocurrencies is the second of two big shocks within the past week. Last Wednesday, mercurial Tesla Motors (TSLA -1.17%) CEO Elon Musk surprisingly announced that his company would stop taking Bitcoin as payment for Tesla vehicles.

Formerly seen as an enthusiastic proponent of Bitcoin in particular and cryptocurrencies in general, the Tesla boss' about-face shook confidence in both.

Battered again on Tuesday, all major cryptos fell significantly. Bitcoin, for example, ended the day more than 9% lower.

 

Eric Volkman has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Bitcoin and Tesla. The Motley Fool has a disclosure policy.

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