Chinese officials warned the public about the risks associated with trading with digital assets. The authorities pointed out three major considerations which might harm investors – false transactions, security breaches, and illegal and criminal activities involving cryptocurrencies.
Tighter Regulations on Crypto Trading
According to the China Financial Stability Report, investors should be extra vigilant when operating with bitcoin and other crypto assets. Officials from China Securities Journal have called for better regulation and pointed out three major risks that trading with digital assets may carry.
First, digital assets are highly decentralized, which means they lack supervision and legal protection. According to the journal, this is a huge disadvantage and can cause price manipulation and false transactions.
Second, the price of most cryptocurrencies, including bitcoin, can easily become an instrument for speculation and can go through sharp declines.’
Third, the movement of funds on blockchain technology is difficult to be observed. This can create an excellent environment for money laundering. Additionally, illegal and criminal activities can also thrive with these conditions as lawbreakers have the opportunity to make drugs or gun transactions using cryptocurrencies.
The Chinese authorities advised that due to these factors, the crypto community must stay alert to prevent these hazards. Furthermore, China Securities Journal reminded that there are no legal crypto trading venues in the country and no regulatory protections:
”Once you encounter risks, you can only bear the consequences. In short, speculation in coins is risky, and you need to be cautious when entering the market.”
China and BTC
Despite the government’s stance, the primary cryptocurrency is highly popular in China – there’s a high number of miners situated in the large Asian nation.
Recently, the country’s central bank announced that it was looking into bitcoin as an alternative investment. Zhou Xiaochuan, former governor of PBoC, outlined the potential of digital assets and their future implementation. However, he ascertained that whatever the case may be, cryptocurrencies must not be used for illicit activities such as drug or weapon trafficking, gambling, or money laundering:
”We believe that crypto assets should play a major role in the future, either as an investment tool or as an alternative investment. Many countries, including China, are also studying it as an investment tool.”