China Cracks Down On Cryptocurrencies, All Transactions Now Illegal

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by Mish Shedlock, The Street:

China cracks down on cryptocurrencies. What’s it really all about?

Crypto Crackdown

In a statement posted on its website on Friday afternoon, All Cryptocurrencies Transactions Illegal In China.

China’s central bank said all cryptocurrency-related transactions are illegal, reinforcing the country’s tough stance against digital rivals to government-issued money.

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The People’s Bank of China said the latest notice was to further prevent the risks surrounding crypto trading and to maintain national security and social stability.

Naming bitcoin, ether and tether as examples, the central bank said cryptocurrencies are issued by nonmonetary authorities, use encryption technologies and exist in digital form, and shouldn’t be circulated and used in the market as currencies.

China banned cryptocurrency exchanges from operating within its borders several years ago, but individuals in the country have continued to find ways to trade bitcoin and other digital currencies via over-the-counter or peer-to-peer transactions.

The statement called for a comprehensive monitoring system, giving local governments “full play” to monitor their regions and flag early warnings. It vowed to crack down on “illegal financial activities” related to cryptocurrencies, and investigate employees of foreign cryptocurrency exchanges inside China as well as others in the industry who continued to advertise or provide crypto-related services.

The central bank said the government shouldn’t let companies use words such as “virtual currencies” or “crypto assets” in their registered names or descriptions of their businesses.

What’s It All About?

Despite what China may claim, this is primarily about capital flight, not fraud, not energy, not money laundering.

Bitcoin is the primary method of getting money out of China. A person would convert yuan to Bitcoin, fly to Hong Kong or a casino in Macau where they would convert Bitcoin to US dollars.

Quest to Transform Macau

Crackdown on Macau Casinos

Bloomberg reports China’s Casino Crackdown Part of Quest to Transform Macau.

For years, Beijing has been focused on trying to control an industry that’s enriched the only Chinese territory where casinos are legal but also provided an avenue for capital outflows for the country’s rising elite. Authorities have been steadily tightening their grip, with facial-recognition software installed in Macau’s ATMs, cash withdrawals limited, and a digital currency under consideration to better track transactions.

The proposed changes, which are now up for consultation with the public and industry, came just a week after the Chinese government released a plan to further integrate Macau with the Chinese mainland. The city is being encouraged to develop non-gaming industries in a special zone on the neighboring island of Hengqin — currently divided between Guangdong province and Macau — with a focus on high-tech manufacturing, cultural tourism, Chinese medicine, conventions and sports, according to a master plan released by Beijing earlier this month. Gambling won’t be allowed.

The license renewal process for the city’s six casino operators is shaping up to be a key test of Beijing’s pivot. With the permits set to expire in less than 10 months, the government is expected to pressure the firms — who have seen gaming revenue contribute 85% of overall revenue on average the past three years, according to Bloomberg calculations from company reports — to boost investment in non-gaming sectors.

The moves significantly reined in what was once the lifeblood of Macau, Song said. Now, Beijing’s wider plan could have a similar effect on the casino industry overall.

While China likely does want to crack down on gambling, part of the crackdown on gambling pertains to stopping capital flight.

Death of the Dollar Theories Circulate Endlessly

Anyone recall how the petroyuan was supposed to crash the dollar?

To refresh your memory, please see Petroyuan’s Crash at Birth April 21, 2018.

Rumors the Renminbi (Yuan) will replace the US dollar in global trade keep circulating.

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