China’s crypto ban could help drive digital yuan adoption

• The People’s Bank of China (PBOC) recently banned all cryptocurrency transactions.
• Crypto crackdown may help boost adoption of China’s digital yuan
• Insider Intelligence publishes hundreds of information, charts and forecasts on the payments and commerce industry. Learn more about how to become a customer.

The People’s Bank of China (PBOC) has banned all cryptocurrency transactions and said it is illegal for foreign crypto exchanges to provide services to Chinese consumers, according to the Wall Street Journal.

The PBOC said the ban was intended to mitigate the risks of crypto trading and maintain national security, according to a statement posted on its website. Many regulators are concerning Crypto transactions can be used to finance illicit activities like money laundering.

China’s stance on cryptos has grown increasingly aggressive despite the global crisis ascend in crypto commerce and payments. In 2013, China banned banks from handling Bitcoin, and in 2017, the central bank made domestic crypto exchanges illegal. The government imposed strict rules in May regarding crypto trading and mining, which caused the price of Bitcoin to plummet. And in June, financial regulators order banks and payment companies to take a more active role in cracking down on crypto-related customer transactions.

China’s crackdown on private crypto may help drive digital yuan adoption, which is set to go official start at the Beijing Winter Olympics in early 2022. China started work on the central bank’s digital currency (CBDC) in 2014 and started testing it in April 2020. This year, it launched a series of pilots.

In July, the PBOC released a progress report on the digital yuan, which find that nearly 21 million personal wallets and 3.51 million corporate digital wallets had been issued. He also reported that nearly 71 million transactions worth about 34.5 billion RMB ($ 5 billion) had been used for retail, transit, bill and government payments.

The removal of traditional cryptocurrencies and crypto-related activities could bring Chinese consumers to the digital yuan and encourage its use.

In April, the Chinese government slapped Alibaba with a huge $ 2.75 billion in fines following an investigation of several months. The following month, PBOC order the country’s biggest tech players, including Tencent, to get rid of all their non-payment financial services. And just this month the government order Ant Group will cut off its lending activity with its subsidiary Alipay.

China’s latest crackdown on cryptocurrencies coincides with the government’s crackdown on domestic retail and financial conglomerates, suggesting the government is seeking to regain control of the country’s financial system.

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