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China embarks on cryptocurrency crackdowns

Many Chinese cities including Shanghai have started to conduct inspections of cryptocurrency exchanges. Last month, President Xi Jinping made a comment in support of blockchain, stressing its role in increasing “China’s influence and rule-making power in the global arena,” reported Xinhua. Cryptocurrency prices soared after that. The recent move by Chinese authorities is an attempt to reduce the possibility of speculation. Shanghai and Shenzhen focused on three areas, including crytprocurency trading and issuance. Companies engaged in such activities are being forced to close down. Under pressure, Chinese companies like Binance have shut their Weibo accounts. Shanghai targets three cryptocurrency activities On Nov. 15, Shanghai’s financial authorities and the Shanghai unit of the People’s Bank of China jointly announced a plan to inspect cryptocurrencies. They are targetting three activities: cryptocurrency trading within Shanghai, selling blockchain-based tokens in exchange for cash, blockchain or etherium, and offering services or platforms for cryptocurrency trading. Rapid expansion across the country Beijing authorities have warned about the dangers of crytpocurrency trading. On Nov. 13, the city’s local financial authorities released a warning to companies that have not received official approval, emphasizing that business permits have never been issued for a crytpocurrency exchange. It also made it clear that it is also illegal for a company outside of Beijing to conduct this sort of business inside the city. Shenzhen released a set of preventive rules regarding illegal cyrptocurrency practices, noting that cryptocurrency fraud cases emphasizing blockchain for marketing were on the rise again. The city announced that it too would launch an investigation to check on the three activities being inspected by Shanghai. The Shenzhen government has already agreed to cooperate with the People’s Bank of China and state officials on the matter. Thirty-nine companies have been identified so far. A big blow for Chinese companies The investigations have already claimed victims. The Weibo account of cryptocurrency exchange Binance was shut on Nov. 13. The social media company explained that this was done because of a violation of Weibo’s rules, but it did not elaborate on which rules the company failed to meet. Two days later, Tron’s Weibo account was closed as well, for the same reason as Binance’s. Tron is a crypto currency. Binance’s office was reportedly closed after the inspection by Shanghai authorities. According to The Block, the office, with 50 to 100 employees, was shut after what looked like a police raid, citing an eyewitness. Binance employees were working remotely and were considering moving operations to Singapore, it added. Binance denied the reports, saying the company has never had an established office in Shanghai and therefore could not be subject to sudden police raids. But considering the small number of cryptocurrency exchanges in Shanghai, and the city’s small presence in cryptocurrency compared to Beijing or Chengdu, Binance was a significant player in the city. According to industry sources, Binance had three offices in Shanghai with more than 200 regular employees. The company is headquartered in Malta, but Shanghai has been its center of operations. Digital Currency Electronics Payment (DCEP) trades Chinese authorities are also investigating the alleged trading of digital currency electronic payment (DCEP), China’s state-run digital currency. DCEP trades have been spotted on several cryptocurrency exchanges. The People’s Bank of China said it has never offered DCEPs, never allowed their trading and warned people “not to be fooled.”

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