Chinese investors frantically find ways to protect virtual currencies

Many investors in China and Hong Kong are anxious to protect their Bitcoin and other cryptocurrencies after Beijing decided to go tough on the market.

Bitcoin dropped 6% during the September 24 sell-off.

Bitcoin fell by 6% and Ethereum by 10% in a widespread sell-off on September 24th after the Central Bank of China announced that all financial transactions involving cryptocurrencies are illegal, including services provided by foreign exchanges.

People’s Bank of China September 24 notices on its website that services providing trading, order matching, token issuance and virtual currency derivatives are strictly prohibited.

“When the above statement was released less than 2 hours ago, I received more than a dozen messages, emails, and phone calls from virtual currency owners in China. They are looking for ways to access and protect assets. their virtual currency on foreign exchanges and ‘cold wallets’ (hardware devices that store virtual currency),” David Lesperance, a lawyer in Toronto (Canada) told CNBC after the Bank’s move. Central China.

Lawyer Lesperance considers Beijing’s move to be an attempt to freeze virtual currency assets so that holders cannot perform any legal acts with them. “Along with the freezing of extremely volatile assets like virtual currencies, I suspect the Chinese authorities will ‘recommend’ virtual currency holders to convert it to digital yuan at a fixed market price. ” said Mr. Lesperance.

China’s move is also said to target over-the-counter (OTC) trading platforms like OKEx, which allow users in China to exchange fiat for virtual currency. Regarding this, an OKEx spokesperson told CNBC that the unit is monitoring the news and will make a specific announcement when making a decision on next steps.

And lawyer Lesperance said some of his clients expressed concern about their safety. “They are worried about themselves because they suspect that the Chinese authorities know well about their previous crypto transactions and they don’t want to be the next ‘Jack Ma’,” Mr. Lesperance added. This lawyer has helped many clients go abroad to avoid taxes amid the increased crackdown on virtual currencies in the US.

In 2017, Chinese authorities ordered the sale of virtual currencies to stop and announced that they would continue to target virtual currency exchanges in 2019. By 2021, China will crack down on mining locations. virtual currency, leaving half of the global Bitcoin system in the dark for several months.

“The announcement (by the Central Bank of China – BTV) is not entirely new, nor is it a change in policy,” said Boaz Sobrado, a fintech data analyst in London. But their move this time involves 10 other important agencies, including the Supreme People’s Court, the Supreme People’s Procuracy, and the Ministry of Public Security, to demonstrate a greater joint effort in policy. virtual currency management.

China’s state foreign exchange regulator also joined the move this time, which could be a sign that regulatory enforcement for cryptocurrencies will be strengthened.

“Many of the Chinese investors, have turned their backs on the latest and greatest crackdown by the Chinese government,” said Mark Peikin, CEO of private investment management firm Bespoke Growth Partners. The country towards virtual currency trading in the past few months may not be so belligerent by now.”

“Until now, the majority of Chinese investors have bypassed the ban by separating transactions on domestic OTC platforms or foreign agents, to reach agreement on the transaction price, and then using banks or fintech platforms to transfer yuan for payment”, ong Mark Peikin added.

However, as the Central Bank of China has increased its supervision of virtual currency transactions, it has recently asked fintech companies, including Ant Group, not to provide virtual currency-related services. Therefore, the door to virtual currency trading for Chinese investors is narrowing.