Chinese state media, the Economic Daily, reported that the Chinese government may introduce even stricter regulations on cryptocurrencies and stablecoins due to the collapse of the Terra ecosystem.
In an article published on May 31, the outlet detailed the collapse of TerraUSD (UST) and Luna (LUNA) explaining how the algorithmic stablecoin works. He used the so-called “black swan” event to hail the Chinese government’s decision to ban cryptocurrency.
“My country has cracked down on virtual currency trading speculation and a large number of trading platforms,” wrote reporter Li Hualin before adding, “it has effectively blocked the transmission of this risk to China and avoided the risks investment as much as possible.”
Hualin explained that “many other countries” are seeking to regulate stablecoins after Terra’s collapse and quoted China Everbright Bank researcher Zhou Maohua to argue for further restrictions in China:
“Going forward, our country will also accelerate the resolution of regulatory loopholes and introduce targeted regulatory measures for stablecoin risk to further narrow the space for virtual currency speculation, illegal financial activities and illegal activities. and related crimes, and better protect the safety of people.”
After banning crypto exchanges in 2017, the Chinese government has once again hardened its stance on crypto since mid-2021. Several agencies have warned of the risk of investing in crypto and a major crackdown on mining in the country has taken place.
Colin Wu, a cryptocurrency journalist, dispelled the misconception around the ban by telling TNZT that the laws don’t allow institutions to provide crypto services “but they don’t prohibit ordinary people from using cryptocurrencies, there is no clear law to prohibit it,” adding:
“Institutions and companies are completely prohibited from trading or possessing cryptocurrency in China, but individuals are free to own, buy and sell, and some local courts even consider them legally protected as property. Virtual.”
Earlier in May, a Shanghai court found that Bitcoin (BTC) was subject to property rights laws and regulations because its value, scarcity, and availability meet the court’s definition of virtual property.
As for how merchants obtain crypto in the first place, TNZT previously highlighted the growing use of VPNs among Chinese merchants. Following the latest round of restrictions, traders have increasingly started to use offshore exchanges or peer-to-peer platforms for all their business.
Related: Shenzhen city drops 30 million free digital yuan to boost consumer spending
Wu says there is a “great possibility” that the Chinese government will impose even tighter restrictions or even complete bans on stablecoins to prohibit the ownership, transfer, purchase and sale of assets, “especially for Tether,” he added.
But China can’t stop at its own borders, the Chinese Communist Party-owned outlet said regulators in other countries should “strive to formulate global general rules” to tighten control of cross-border payments .
The Beijing regime’s spokesperson concluded that the move “will prevent virtual currency from becoming a tool for money laundering, fraud and illegal fundraising.”