China Strengthens the Punishment on cryptocurrency
China has strengthened its oversight of cryptocurrencies, threatening immediate punishment for any company involved in speculative investment in the digital tokens. The Chinese government called for calm in the markets as President Xi Jinping’s endorsement of blockchain triggered the speculative trading of cryptocurrencies. The government will maintain watch on companies in China and outside of the country. This means companies with headquarters outside of China could be subject to punishment. China toughened its monitoring in large cities, such as Beijing, Shanghai and Shenzhen. Shanghai banned the operation of cryptocurrency exchanges on Nov. 15 and launched an investigation. The probe was scheduled to end by Nov. 22, but it will continue without a set date for conclusion. Beijing is taking a similar stance as the police in the capital city detained employees at a cryptocurrency exchange called BISS. The police alleged BISS engaged in illegal activities. Some expected that China would lift a Sept. 4 directive from authorities that prohibited cryptocurrency trading and initial coin offerings. When Xi Jinping said that China will embrace blockchain to increase innovation and self-reliance in the country's technology sector, some industry watchers expected an easing of regulations to follow. Chinese authorities also excluded cryptocurrency mining from the list of restricted activities. Following the moves, the number of cryptocurrency companies has been on the rise in China. Looking into the latest data, a total of 2,800 cryptocurrency or blockchain companies operate in Beijing, a sharp increase compared to 700 across China last year. The Chinese government warned of stricter cryptocurrency regulations. A source cited in the China Securities Journal said that the stance of the authorities barely changed and that they want to ramp up punishment. The authorities already shut six cryptocurrency exchanges and kicked 203 platform operators out of China. The government also asked banks and payment companies not to process cryptocurrency-based transactions. As a result, WeChat Pay and Alipay closed about 1,000 accounts. WeChat also closed 300 services related to cryptocurrency. The authorities are looking beyond the mainland. A source from the Chinese government said that “we are expecting cooperation with other countries to regulate cryptocurrency. But since each country has different regulations, it will take time to come up with relevant measures.” The direction means that companies outside of China could come under the jurisdiction of the Chinese regulators. “A large number of companies based outside China only left their development teams in China and operate sales abroad. But the development could also violate the law and attract punishment. Even if someone is in other countries, their activities are subject to Chinese rules. This is the same case when the person gives up Chinese citizenship.” This means that the Chinese government can take action with authorities from other countries, when needed.