Chinese state-owned media outlet Economic Daily has signaled that China may increase its crackdown on digital currencies. The scrutiny will be focused mostly on stablecoins following the high-profile crash of Terra’s algorithmic stablecoin, UST.
In a recent article, the state media outlet detailed the situation surrounding the crash of UST and Terra. It described the crash as a “black swan” event that wiped out over $42 billion of investors’ money.
The article asserted that China would fix regulatory loopholes that allow dissidents to still trade digital currencies. This will reduce any risks that stablecoins can pose to the country.
“In the future, our country will also speed up the completion of regulatory shortcomings, and introduce targeted regulatory measures for the risk of stablecoins to further reduce the space for virtual currency speculation, illegal financial activities, and related illegal and criminal activities, and better protect the safety of the people,” it said.
Meanwhile, the report lauded the current ban on digital currencies and said it has ensured that the country has not been greatly affected by the crash. Li Haulin, a reporter, was quoted saying:
“My country has been cracking down on virtual currency trading speculation and a large number of trading platforms. This has effectively blocked the transmission of this risk in China and avoided investment risks to the greatest extent possible.”
Digital currency investors continue to linger in China
While digital currency transactions and block reward mining have been banned in China since last year, reports indicate that the industry is still lingering on in the country. Investors have been circumventing the ban by using peer-to-peer platforms and VPNs to access offshore exchanges.
The ban is also being interpreted differently and seems to only apply to firms at the moment. In a landmark ruling between two individuals, a Chinese court ruled that Bitcoin is virtual property and is protected by corresponding property law.
To fill the vacuum created by the ban on digital currencies, China has also been pursuing several blockchain initiatives as well as a central bank digital currency (CBDC).
China is pushing the CBDC development both within its borders and internationally. According to Bloomberg, China is ahead of the pack where a CBDC is concerned. This lead in CBDC development has encouraged other central banks to introduce similar regulations for digital currencies in their markets.
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