The People's Bank of China (PBoC) has addressed issues related to cryptocurrency regulation and decentralized finance (DeFi) in its latest financial stability report, in which it calls for a worldwide effort to establish crypto rules.
The Chinese central bank devoted a separate section to cryptocurrency assets in its new financial stability report, stressing the need for the industry to be regulated using joint efforts by different countries. Published on Dec. 22, the report says the cryptocurrency market accounts for 1% of the global financial system, and its connection with traditional finance is limited.
According to local industry journalist Colin Wu, PBoC’s latest financial stability report has devoted a separate section dedicated to crypto assets for the first time ever. In the report, the central bank called on governments worldwide to apply the approach of “same business, same risks, same supervision” to avoid regulatory arbitrage.
The report referred to a number of potential risks stemming from cryptocurrency regulatory arbitrage, referring to vulnerabilities to hacker attacks, market manipulation and concerns related to DeFi government mechanisms. The PBoC specifically mentioned the Terra ecosystem collapse and the fall of FTX exchange in 2022, urging the need to manage regulatory fragmentation and eliminate supervision arbitrage.
China’s move to urge the global community to regulate the cryptocurrency industry jointly comes a few years after the government of mainland China issued a major ban on crypto.
Related: China proposes ban on converting game tokens to fiat currency
In 2021, the PBoC officially announced measures to fight against crypto adoption in mainland China, pushing for stronger inter-departmental coordination in cracking down the crypto activity in the country. Despite the ban covering virtually all crypto transactions and cryptocurrency mining, mainland China has remained a major crypto-mining hub.
According to some industry executives like Animoca co-founder Yat Siu, Hong Kong’s rapid crypto adoption could signify some “big moves” going forward in crypto regulation in mainland China. On the other hand, other local execs believe China’s crypto stance has nothing to do with crypto-friendly moves in Hong Kong.
Magazine: China’s surprise NFT move, Hong Kong’s $15M Bitcoin fund: Asia Express
