China central bank urges tougher crackdown on cryptocurrencies

China’s central bank said on Monday it had summoned some banks and payment institutions recently, urging them to crack down harder on cryptocurrency trading.

The People’s Bank of China’s meeting with institutions including Agricultural Bank of China (AgBank) and Alipay came after China’s State Council, or cabinet, last month vowed to crack down on bitcoin trading and mining.

The PBOC urged institutions to launch thorough checks on clients’ accounts to identify those involved in cryptocurrency transactions, and promptly cut their payment channels.

“Speculative trading in virtual currencies roils economic and financial order, spawns the risks of criminal activities such as illegal asset transfers and money laundering, and endangers people’s wealth,” the PBOC said in a statement.

Other participants in the PBOC’s meeting included state-owned China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC) and Postal Savings Bank of China.

Bitcoin’s bull run globally had revived speculative trading in China, where people buy cryptocurrencies using yuan via bank accounts or payment platforms. Last month, three industry associations issued a ban on crypto-related financial services, but the bodies are much less powerful than the PBOC.

The PBOC asked banks and payment companies to invest more in technologies used to better identify crypto-related transactions, and know their clients better.

After the central bank’s notice, AgBank, ICBC, CCB and Alipay all released separate statements saying they would conduct due diligence on clients to root out illegal crypto-related activities and shut down suspicious accounts.

As China ramped up its campaign against cryptocurrencies in recent weeks, bans on cryptomining have been issued in major bitcoin mining hubs, including Sichuan, Xinjiang, and Inner Mongolia.

China has also blocked a slew of cryptocurrency-related social media accounts, and barred the search for major cryptocurrency exchanges such as Binance and Huobi on baidu.com and Twitter-like platform Weibo.

BITCOIN TUMBLES: Bitcoin tumbled almost 10 per cent on Monday as recent volatility in the cryptocurrency market showed no signs of dampening down, with market players citing jitters over China’s expanding crackdown on bitcoin mining in thin liquidity for the losses.

Bitcoin fell as low as $32,094 to its lowest in 12 days, dragging smaller coins down. It was last down 8.3 per cent, on course for its biggest daily drop in a month.

The world’s biggest cryptocurrency, long plagued by volatility, has lost over 20 per cent in the last six days alone and is down by half from its April peak of almost $65,000. Still, it has still gained over 10 per cent this year.

The drop comes amid a growing crackdown on cryptocurrencies in China, where authorities in the southwest province of Sichuan on Friday ordered bitcoin mining projects to close. China’s central bank said on Monday it had summoned some banks and payment institutions recently, urging them to crack down harder on cryptocurrency trading. The People’s Bank of China urged the institutions to promptly cut payment channels for cryptocurrency trading. They must not provide other crypto-related financial services, PBOC said.

The State Council, China’s cabinet, last month vowed to clamp down on mining and trading as part of a series of measures to control financial risks.

Data on mining is scarce. Yet production of bitcoin in China accounted last year for about 65 per cent of global production, according to data from the University of Cambridge, with Sichuan its second-biggest producer.

Companies that mine bitcoin - an energy-intensive process - typically hold large inventories of the cryptocurrency, with any moves to sell large amounts depressing prices.

“(The) crackdown on Chinese miners might mean that they are offloading coin into a thin market and taking us lower,” said Ben Sebley of London-based crypto firm BCB Group.China’s central bank said on Monday it had summoned some banks and payment institutions recently, urging them to crack down harder on cryptocurrency trading.

The People’s Bank of China urged the institutions to promptly cut payment channels for cryptocurrency trading. They must not provide other crypto-related financial services, PBOC said.

Agricultural Bank of China (AgBank), China’s third-largest lender by assets, said separately it was following the People’s Bank of China’s guidance and would conduct due diligence on clients to root out illegal activities involving crypto mining and transactions.

Smaller rival ether, which tends to move in tandem with bitcoin, dropped as much as 12 per cent, falling below $2,000 for the first time in almost a month.