China sent shock waves through global markets on Friday after its central bank issued a shock statement that said all cryptocurrency-related transactions are illegal and must be banned.
It was the strongest signal from the country of its determination to crack down on the industry, even though it is working on its own cryptocurrency.
The surprise announcement and the way it was slipped out on Friday on the PBOC website, with no minister’s name attached also raised eyebrows.
It saw crypto investors in China and especially Hong Kong hurry to try and move their investments offshore and out of sight of the Chinese government.
Investors, analysts and others have been watching the PBOC website daily for any updates on the fate of troubled Chinese property group, Evergrande.
There was none from the central bank on Friday, but there was the shock news to bank crypto currencies completely.
However the absence of news from Evergrande that a $US83.5 million interest payment was supposedly made on Thursday on a foreign bond, triggered a slide in its shares on the Hong Kong market on Friday and rattled it ad mainland markets as well.
The impact from statement from the People’s Bank of China (PBOC) though didn’t spillover into non-crypto markets.
All cryptocurrencies, including Bitcoin, Tether, Ethereum etc are not fiat currency and cannot be circulated on the market, the PBOC said in a posting on its website on Friday.
All crypto-related transactions, including services provided by offshore exchanges to domestic residents, are illicit financial activities, it said.
In a Q&A posted to its website, the People’s Bank of China (PBOC) said services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited. Overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said.
“Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity,” the PBOC said. Workers of foreign crypto exchanges will be investigated, it added.
The PBOC said it has also improved its systems to step up monitoring of crypto-related transactions and root out speculative investing.
The PBOC also ordered banks and non-bank payment institutions like Alibaba’s financial arm, Ant Group not to provide services related to crypto.
“Financial institutions and non-bank payment institutions cannot offer services to activities and operations related to virtual currencies,” the bank said, reiterating statement from it earlier this year when China ordered all crypto mining activity in China to end and moved them offshore.
The price of bitcoin sank over 6% to around $US42,100, according to Coin Metrics data. Ethereum, the second-largest digital asset, fell 10% to around $US2,700.
Reuters reported that the shares of companies with heavy exposure to crypto also slumped in premarket trading, with Coinbase down by nearly 4% at one stage and MicroStrategy off around 5%. Both recovered a little at the close.
Meanwhile the Chinese government crackdown on indebted businesses and their senior executives and chairmen continues with the news that HNA, the once high-flying conglomerate, said on Friday that its chairman and its chief executive had been taken away by police due to suspected criminal offences.
The company which was placed in bankruptcy administration in February, said in a statement on its official WeChat account it had been notified by police in its home province of Hainan, southern China, that Chairman Chen Feng and CEO Tan Xiangdong had been taken into custody, according to western media reports.
“The operations of HNA Group and its member companies are stable and orderly, and the bankruptcy and restructuring work is progressing smoothly according to the law,” the company said.
A separate HNA statement on Friday said the company’s Communist Party members were informed in a meeting that police had taken away Chen and Tan. Attendees were urged to strengthen the party’s leadership in HNA.
In the 2010s HNA Group, whose flagship business is carrier Hainan Airlines, used a $US50 billion global acquisition spree, mainly fuelled by debt, to build an empire with shareholdings in businesses from Deutsche Bank to Hilton Worldwide.
That included a stake of just on 20% of Virgin Australia before it went broke in 2020.