Chinese state media the Economic Daily has noted that the Chinese government could introduce even stricter regulations on cryptocurrencies and stablecoins due to the collapse of the Terra ecosystem.
In an article published on May 31, the outlet detailed the collapse of TerraUSD (UST) and Luna (LUNA)explaining the workings of the algorithmic stablecoin. He used the so-called black swan event to praise the Chinese government’s decision to ban cryptocurrencies..
“My country has cracked down on speculation in virtual currency trading and a large number of trading platforms,” journalist Li Hualin wrote before adding: “This has effectively blocked the transmission of this risk in China and avoided investment risks to the greatest extent possible.”.
Hualin explained that “many other countries” are looking to regulate stablecoins following the collapse of Terra. and quoted Zhou Maohua, a researcher at the China Everbright Bank, to argue for more restrictions within China:
“In the future, our country will also speed up the completion of regulatory deficiencies, and introduce specific regulatory measures for stablecoin risk in order to further reduce the space for virtual currency speculation, illegal financial activities and illegal and related criminal activities, and better protect the safety of the people.”
After banning cryptocurrency exchanges back in 2017, the Chinese government has once again toughened its stance on cryptocurrencies since mid-2021. Multiple agencies have warned of the risk of investing in cryptocurrencies.and a major repression of mining was carried out within the country.
Colin Wu, a cryptocurrency reporter from China, cleared up the misconception around the ban; he told Cointelegraph that the laws do not allow institutions to provide cryptocurrency services “but they do not prohibit ordinary people from using cryptocurrencies; there is no clear law that prohibits it”adding:
“Institutions and companies are completely prohibited from trading or holding cryptocurrencies in China, but individuals are free to own, buy and sell them, and some local courts even consider them legally protected as virtual property.”
Beginnings of May, a Shanghai court ruled that bitcoin (BTC) is subject to proprietary rights, laws and regulations as its value, scarcity and availability meet the definition of virtual property, according to the court.
As for how traders get cryptocurrencies in the first place, Cointelegraph previously highlighted the growing use of VPNs among Chinese traders.. After the latest round of restrictions, traders began to use more and more foreign exchanges or peer-to-peer (P2P) platforms for all their activities.
Wu says there is a “strong possibility” that the Chinese government will impose even tighter restrictions or even outright bans on stablecoins to prohibit the ownership, transfer, purchase, and sale of the assets, “especially for Tether.”he added.
However, China may not stop at its own borders, as the Chinese Communist Party-owned media outlet said regulators in other countries should “effort to formulate global general rules” to tighten scrutiny of cross-border payments.
The media of the Beijing regime concluded that the measure “will prevent virtual currency from becoming a tool for money laundering, fraud and illegal fundraising”.
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