China’s Economic Daily media outlet indicated that it may take further regulatory action in relation to stablecoins following the collapse of Terra’s algorithmic stablecoin.
China’s state-owned media outlet, Economic Daily, indicated that the Chinese government could introduce tighter regulations regarding cryptocurrencies and stabilizecoins in response to the collapsed Terra ecosystem.
An article published May 31 detailed the collapses of TerraUSD (UST), and Luna ( -LUNA), as well as the functioning of the algorithmic stablecoin. To praise China’s decision to ban cryptocurrency, it used the black Swan event.
Reporter Li Hualin stated that “My country has been crackingdown on virtual currency trading speculation, and a large amount of trading platforms,” before adding, “This has effectively blocked transmission of this risk to China and avoided investment risks the greatest extent possible.”
Hualin stated that many other countries are trying to regulate stablecoins after the Terra collapse. Zhou Maohua (a researcher at China Everbright Bank) was quoted to support further restrictions in China.
“In the future our country will accelerate the completion of regulatory deficiencies and implement targeted regulatory measures to reduce the risk of unstablecoins to further decrease the space for virtual currency speculation and other illegal financial activities. This will better protect the safety and security of the people.”
Since mid-2021, the Chinese government has been readjusting its position on crypto after banning them in 2017. Numerous agencies warned about the danger of crypto-investment and a major crackdown was put in place on mining within China.
Colin Wu, a China-focused cryptocurrency reporter explained the myths surrounding the ban to Cointelegraph. He said that although the laws didn’t permit institutions to offer crypto services, they don’t prevent ordinary people from using them — there’s no clear law prohibiting it.”
“Institutions and businesses are prohibited from trading or owning cryptocurrency. However, individuals can own, buy, and sell them. Some local courts consider them legal property.
A Shanghai court ruled that Bitcoin ( Bitcoin) was subject to property laws, regulations because its value, scarcity, and disposability satisfy the definition of virtual property.
Cointelegraph has previously reported on the increasing use VPNs by Chinese traders. After the previous round of restrictions, traders started to use offshore exchanges and peer-to-peer platforms (P2P), for all their activities.
Wu stated that there is a “great chance” that the Chinese government will impose more restrictions or complete bans on stablecoins in order to prohibit ownership, transfer and sale of these assets, especially for Tether.
China is not likely to stop at its borders. The Chinese Communist Party-owned outlet stated that regulators from other countries should “strive for global general rules” in order to tighten oversight of cross-border payments.
Beijing regime outlets concluded that virtual currency will not be used for money laundering, fraud, or illegal fundraising.