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Implications widespread as China cracks down on cryptocurrency mining

Ben Blaschke by Ben Blaschke
Wed 26 May 2021 at 06:38
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China has outlined renewed plans to crackdown on the investment and trading of international cryptocurrencies, including Bitcoin mining, as it moves closer to launching its own Digital RMB.

State-owned media outlets Xinhua reported Beijing has enhanced supervision over all virtual currencies in order to fend off financial risks and forestall speculation in virtual currency businesses.

In particular it is focusing on Bitcoin mining and trading, as per a statement from the financial stability and development committee under the State Council.

The statement immediately drew a reaction from companies impacted, including Sun International Group Limited – a subsidiary of Hong Kong-listed Suncity Group – which announced in February that it had reached an agreement to purchase 1,000 sets of cryptocurrency miners to diversify its business streams.

Sun International issued an announcement this week reading, “In light of the statement made by the State Council’s Financial Stability and Development Committee of the People’s Republic of China … on Bitcoin mining and trading activities, on 24 May 2021 the Group instructed the relevant service provider to suspend the cryptocurrency miner operating service pending further discussion with each other.

“The Group will support and follow the direction of the PRC Government and stop the related mining activities in the PRC. In this regard, the Group will discuss with the relevant service provider and take necessary actions with a view to continuing its cryptocurrency mining activities in other country(ies) or region(s).”

Chinese lottery company 500.com, which had briefly expressed an interest in developing an integrated resort in Japan, has also invested in Bitcoin mining equipment while Ponte 16 investor Success Universe recently confirmed the purchase of US$1.3 million worth of Bitcoin.

According to Xinhua, China’s crackdown is an escalation of the nation’s current virtual currency regulations because they expand the focus from Bitcoin trading to mining. Three financial self-regulatory bodies have also issued a joint statement banning financial institutions and payment companies from providing cryptocurrency services to customers in any way, including accepting cryptocurrency as payment.

Victoria White, Special Counsel and Technology Expert Lawyer for Macau’s MdME Lawyers, told Inside Asian Gaming that Beijing appears to be taking the next steps in regards to its existing prohibitions on cryptocurrency activities, which have been in effect since 2013.

“Ultimately, these virtual currencies are not issued by the PBOC (People’s Bank of China) or other monetary authorities and so China regards them as a type of virtual commodity which should not be used or have the same legal status as a currency,” White said.

“For policy reasons – oversight, transparency and control – the PBOC has imposed the restrictions on virtual currency investment and trading activities.

“However, leaving cryptocurrencies aside, it’s not to say that in future the Chinese Government will not consider a legal framework for (non-currency) crypto-assets in the FinTech sector. This would need to embody appropriate regulatory safeguards to assure retail and institutional investors of the security and transparency of the market.”

The crackdown comes as China continues to expand trials of its own Digital RMB, expected to be put into full circulation by around 2024.

The Digital RMB will likely have significant implications for Macau too, with Chief Executive Ho Iat Seng recently revealing the SAR will amend its financial laws to allow for the introduction of China’s Digital RMB in the future.

As previously reported by IAG, China’s Digital RMB has the potential to be a game-changer for Macau by overhauling entire payment systems, reducing reliance on payment apps such as WeChatPay and Alipay and potentially replacing the pataca as Macau’s main currency.

“If the RMB were to become legal tender in Macau, then the path is opened to usage of Digital RMB as well,” said Brokerage Bernstein in a recent note.

“In the context of casinos, this would mean for example being able to buy chips for play directly from the casino cage (or even a table) instantly using (digital) RMB without the need to convert into HKD.

“The elimination of the need for currency conversion from the key Macau customer group (mainland Chinese) would be advantageous as it would simplify the process and not subject customers to f/x transaction costs.

“Digital RMB would allow greater government scrutiny and control over money flows. But it would also allow easier money transfer [and] eliminate the need to use intermediaries (like junkets, underground banks or pawnshops).

“Mass and premium mass play could surely benefit due to ease of money flow.”

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Tags: BeijingBitcoinChinacryptocurrencyminingVictoria White
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Ben Blaschke

Ben Blaschke

A former sports journalist in Sydney, Australia, Ben has been Managing Editor of Inside Asian Gaming since early 2016. He played a leading role in developing and launching IAG Breakfast Briefing in April 2017 and oversees as well as being a key contributor to all of IAG’s editorial pursuits.

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