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The People’s Bank of China, in its Financial Stability Report 2021, had pointed out that its clampdown on virtual currencies was complete.
Days after the release of the report, Zhou Xiaochuan, former governor of the Chinese central bank, commented on conventional tools of supervision. He said that the traditional regulatory methods were no longer sufficient to deal with money laundering activities.
According to Chinese journalist Colin Wu, the statement meant a further crackdown on money laundering activities involving cryptocurrencies.
Earlier in June, the Chinese police reportedly arrested over 1,100 suspects in crypto-related money laundering crimes. In 2020, the country ranked high in both, funds sent to and received, from darknet markets via money laundering services. Chainalysis report on Crypto Crime in 2021 also established that darknet vendors “typically launder funds through cryptocurrency services” in China.
For better supervision, Xiaochuan reiterated the use of emerging digital technologies. After achieving its supervision target, the Chinese central bank had moved cryptocurrencies under normalized supervision. However, it looked like the administration was still trying to maintain a grip on the segment responsible for scams. Apart from this, China is not expected to make any major policy announcements on cryptocurrencies for the rest of the year.
China’s most recent policy statement, which prohibited mining operations, prompted a major flight of miners. Following that, the Chinese government declared victory this month, citing positive financial results.
However, top and lower Chinese courts issued judgements in the recent month, indicating that cryptocurrencies are still being viewed with suspicion. The Shandong Court ruled that bitcoins are “not legally protected.” In another example, six Chinese nationals were allegedly detained for engaging in virtual currency transactions, which violated China’s exchange transfer restriction. They are facing a 2-4 year prison sentence.
All this comes as the nation is testing the launch of its digital yuan. While experts have discussed the benefits of China’s retail central bank digital currency (CBDC), there are also concerns around financial surveillance.
Other countries have also been tightening their regulatory hold over DeFi and cryptocurrencies, with the U.S. SEC now keeping stablecoins like Tether under its radar.
Meanwhile, Bitcoin hashrate recovered post China’s crackdown, which had impacted it severely. At press time, BTC hashrate stood at 135.09 EH/s. Along with that, the difficulty was up 18.42 T as Chinese miners settle in other parts of the world.