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Bitcoin markets scramble to drop Chinese users after national cryptocurrency ban


China announced a nationwide ban on cryptocurrency trading as it looks to set up its own digital currency (Getty Images)

China sent shockwaves through the cryptocurrency world last week when it imposed a national ban on buying and trading in cryptocurrency.

As a result, cryptocurrency exchanges (where the buying and trading takes place) are scrambling to sever ties with mainland Chinese users.

Shares in a range of Chinese crypto-related firms plunged on the ban which closes off loopholes left in previous regulatory crackdowns on the sector.

Ten powerful Chinese government bodies said in a joint statement on Friday that overseas exchanges were barred from providing services to mainland investors via the internet – a previously grey area – and vowed to jointly root out ‘illegal’ cryptocurrency activities.

In response, Huobi Global and Binance, two of the largest exchanges globally and popular with Chinese users, stopped new registrations of accounts by mainland customers.

Huobi also said it would clean up existing ones by the end of the year.

‘On the very day we saw the notice, we started to take corrective measures,’ Du Jun, Huobi Group co-founder said in a statement to Reuters.

Du did not give an estimate of how many of its users would be affected, saying only that Huobi had embarked on a global expansion strategy many years ago and seen steady growth in Southeast Asia and Europe.

TokenPocket, a popular service provider of crypto wallets, also said in a notice to clients that it would terminate services to mainland Chinese clients that risk violating Chinese policies and would ‘actively embrace’ regulation.

Some of the world’s biggest crypto exchanges originated in China but Chinese authorities have come to see cryptocurrencies as speculative instruments lacking in intrinsic value, prone to acute price moves and a means to circumvent capital controls.

Chinese authorities have instead thrown their weight behind the development of an official digital currency.

Chinese authorities want to create their own digital currency (Credits: Getty Images)

The ban, which comes amid a swath of regulatory actions that have hit a range of sectors from gaming to tech to for profit-tutoring, makes it very hard for Chinese mainland investors to buy or sell the assets unless they leave the country.

It does not, however, go so far as to declare ownership of cryptocurrencies as illegal.

In contrast, while elsewhere in the world cryptocurrency firms are facing increased oversight, outright bans are rare.

‘I don’t believe China’s approach will set a standard for how other countries approach regulating this space,’ said John Wu, president of Ava Labs, a blockchain company.


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