China orders banks to stop financing cryptocurrencies as noose tightens around disrupter

The People’s Bank of China has ordered financial institutions to stop providing banking or funding to any activity related to cryptocurrencies, further tightening the noose since its shutdown of crypto exchanges last September sent digital currency enthusiasts fleeing overseas.

“Every bank and branch must carry out self-inspection and rectification, starting from today,” according to a document issued by the central bank on Wednesday. “Service for cryptocurrency trading is strictly prohibited. Effective measures should be adopted to prevent payment channels from being used for cryptocurrency settlement.”

The Chinese-language document, as seen by the South China Morning Post, was distributed as an internal document among banks, and not published on the central bank’s official website.

“Banks should enhance their daily transaction monitoring, and the timely shut down of the payment channel once they discover any suspected trading of cryptocurrencies,” the document said, adding that the deadline for disclosing the measures is on January 20. The emphasis was on handling any capital settlement to avoid any financial losses by cryptocurrency investors from escalating into public protests - known as “group events” in China - and preserve social stability, the central bank said.

The People’s Bank of China has taken a particularly harsh stance to crack down on cryptocurrencies like bitcoin - the oldest and most popular variant of cryptocurrency - whose origin was to disintermediate the role of central banks and fiat currencies to arrive at a borderless, costless and anonymous form of exchange. China is home to the world’s largest cryptocurrency mines, with an estimated 111 megawatts of computational power put to work, more than double the mines in the nearest rival Georgia.