China’s central bank said Tuesday it has ordered the closure of a company “suspected of providing software services for virtual currency transactions.” The statement , issued by the People’s Bank of China’s Beijing office, also warned institutions not to provide other bitcoin-related services , including providing business space or marketing
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The crackdown on digital currencies is nothing new in the country.
In 2013, China ordered third-party payment providers to stop using bitcoin. Chinese authorities halted sales in 2017 and vowed to continue targeting cryptocurrency transactions in 2019.
But usually, whenever Beijing attacks the digital currency industry, it is forced to soften its stance afterwards. This time, however, it seems to be different.
In May, China banned financial institutions and payment companies from providing cryptocurrency. In June, there were mass arrests in China of people using cryptocurrency in malicious ways. That same month, regulators increased pressure on banks and payment firms to stop providing cryptocurrency services, and Weibo, China’s Twitter, suspended cryptocurrency-related accounts.
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“The Chinese government is doing everything it can to ensure that bitcoin and other cryptocurrencies disappear from the Chinese financial systems and economy,” said Fred Thiel, CEO of Marathon Digital Holdings and member of the Bitcoin Mining.
So why has China essentially declared war on cryptocurrencies in 2021?
“We’re all wondering,” said Nic Carter, founding partner of Castle Island Ventures.
One theory is that it is part of a broader law and order move ahead of the Chinese Communist Party's centennial anniversary this year.
"They destroy all kinds of unwanted behavior," Carter said.
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Crypto has long become synonymous with crime on the mainland.
Another theory is that China is paving the way for its own digital currency, which has been in development since 2014. The most likely motive, according to Carter, is that Beijing is seeking to limit capital outflows through stablecoins and cryptocurrencies.
