In the past week, the People’s Bank of China (PBoC) issued an order for major financial institutions to stop crypto transactions. This move pushed bitcoin’s price down to below $30,000 for the first time since January 2021. Some say that the crackdown creates the best opportunity for better standards in the budding market. In late June, the United Kingdom barred one of the biggest cryptocurrency exchanges by trading volume, Binance, from offering to operate in its jurisdiction. Binance was banned from offering regulated services like trading cryptocurrency derivatives. In the meantime, South Korean exchanges have decided to stop trading alternative cryptocurrencies (kimchi coins) as new financial rules come into effect.
Cryptocurrency regulation receives mixed reaction
Some traders and exchanges welcome heavy regulations to eliminate fraud, criminals, and money laundering from the budding sector. They believe that the move will help bring crypto-assets into the mainstream, Nikkei Asia reports. Other participants are doubtful. They think that the move will bring in widespread clampdown which will limit the industry’s revolution. One digital asset investment specialist, Arca, wrote referring to China’s action: Two of the most progressive Asian jurisdictions on cryptocurrencies have not changed their stand. Japan’s Financial Services Agency did not tighten rules on digital assets despite issuing a warning in the past week that Binance was letting Japanese traders use the exchange without a local license. Singapore also did not ban crypto activities despite its central bank chairman warning in April that cryptocurrencies are ‘bad’ for retail investors due to their excessive volatility. The chief risk officer for B2C2 Japan, an over-the-counter trader, Adam Farthing, commented: Such competition may prevent blanket bans on the crypto market, as is the case with a bill being considered by India’s parliament. One inventor of blockchain technology, Scott Stornetta, said: Thus, governments and financial institutions will eventually find some middle ground to operate concurrently with cryptocurrencies.
The digital asset economy still thriving
Japan, Singapore, and many other countries are still trying to study and benefit from the budding digital currency market. Even as China cracks down on bitcoin mining, it has distributed nearly 200 million digital yuan in various pilot programs. The senior vice president at Uppsala Security that investigates crypto cybercrimes, John Kirch, stated: Binance insists that the UK ban does not affect its global strategy. The exchange wrote in an official statement: “What we can say is that we take a collaborative approach in working with regulators around the world, and we take our compliance obligations very seriously.” A Binance spokesperson said that the platform has helped investigations into different cyber crimes and complied with all rules and regulations worldwide. The exchange has blocked users from restricted areas using anti-money laundering (AML) and know-your-customer (KYC) tools. It has also assembled a knowledgeable and experienced international compliance team and advisory board to help in fulfilling all set regulations globally.
Compliance may cost some market operators heavily
One Hong Kong-based crypto financial services firm, Babel Finance, confirmed that it would invest $40 million to boost internal controls and legal expertise. Notably, the company will invest nearly all of the funds it acquired from a recent fundraising round into this compliance exercise. Flex Yang, CEO of Babel Finance, said: China’s shutdown of over 26 bitcoin mining centers in the hydropower-rich Sichuan Province in June may bring positive returns to the sector, according to Arca. While discussing the computational power of a mining operation, some analysts wrote: Hong Kong legislators will discuss a bill in their next session that might compel all crypto exchanges operating in the city to be licensed. The government proposes that only the high net worth professional investors with a portfolio of over 8 million Hong Kong dollars ($1 million) will be authorized to trade cryptos. One cryptocurrency derivatives exchange operating from Hong Kong, FTX, said that if the city’s ban on retail investors affects international investors, it would exit Hong Kong. FTX’s founder Sam Bankman-Fried said that what matters is that the company needs to be in the right place to do its business. He spoke to Nikkei Asia, where he also said that he has not yet decided on a relocation. [binance]
