Following Terra’s collapse, China authorities enforce greater regulation on digital assets

  • Reports from the Economic Daily media in China show that China is planning increased regulation of the stablecoin sector.
  • Chinese communist party wants uniform crypto regulations globally.

The economic daily (the official media outlet of China authorities) has published its detailed version of the cause of the Terra network crash. Part of the article explained how algorithmic stablecoins work. It also used the opportunity to praise Chinese authorities for its outright ban on cryptos.

One of the media’s reporters, Li Hualin, wrote, “my nation has clampdown on digital asset trading and several trading platforms continually.” Hualin further said, “China has been able to avoid the consequences of risks associated with this sector. Also, there are nearly zero investment risks for any Chinese.” He added that “several other authorities are using the Terra crash to regulate the stablecoin sector.”

Quoting Zhou Maouhua to prove his point, Hualin said,

our authorities will soon update our crypto policy to cover all aspects of the industry. They will also establish additional measures to reduce exposure to stablecoins risk. Hence, there would be nearly zero chance for crypto prediction, fraudulent financial operations, and other financial crimes. Hence, our citizens will be better protected and safe.”

Maohua is one of the leading analysts at China’s Everbright Bank.

China’s clampdown on the crypto industry

The Chinese banned crypto exchanges five years ago. Then, last year, it announced a total ban on crypto activities. The move to ban all crypto activities in the country started with repeated warnings from agencies about crypto investment risks.

Then, the government issued notices to all Chinese provinces to start a massive crackdown on crypto mining. Later, the provinces extended the clampdown to all crypto operations. However, famous China-based crypto journalist, Colin Wu, stated that there are various false statements regarding the ban. Wu is popularly known as Wu blockchain on Twitter.

According to Wu, the crypto ban is solely for crypto-related service providers. He said any individual could hold or invest with cryptos. He explained that “China only banned institutions and enterprises from crypto trading or holding. However, anyone can hold or perform crypto transactions; it isn’t against the law. Even some local courts consider these digital assets as virtual property. Hence, individual holders are protected by law.”

Earlier this month, a Shanghai court clarified that based on the definition of virtual property, BTC is one. Also, BTC’s value, scarcity, and disposability make it subject to property rights, laws, and regulations.

The court didn’t say anything about whether holders are obtaining their cryptos through legal or illegal means. However, multiple data confirm that many Chinese crypto traders perform their crypto transactions through VPNs. The recent clampdown operations increase the volume of crypto transactions through offshore exchanges and peer-to-peer platforms by Chinese traders.

Tighter crypto regulation is coming – Wu

According to Wu, it is likely that China authorities will extend their crypto restriction to stablecoins. They may even ban it altogether. The move will prevent the transfer of ownership of stablecoins, particularly, Tether. Wu further said China would also make moves to encourage other nations to take similar steps as them.

The economic daily further said that China would love other nations to develop more uniform regulations on increasing regulatory sanctions on cryptocurrencies. In the report’s conclusion, the Beijing-based media outlet stated that a uniform global regulation of crypto would prevent the use of digital assets for illegal purposes, especially financial frauds.

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