Why Is There a Global Crypto Crackdown?

From Bitcoin to Binance, we explore the factors that are contributing to this global crackdown.

Between the recent restriction of Binance in Britain and the crackdown of Bitcoin mining in China, restrictions on crypto and crypto trading are dramatically affecting market prices across the board.

China announced its crackdown on cryptocurrencies, which caused prices to plunge. China prohibits all its banks and financial institutions from providing customers with any services involving cryptocurrency, including token issuance and trading. The country’s financial institutions have also issued warnings about speculative trading. China Internet Finance Association, China Banking Association, and China Payment and Settlement Association issued a joint statement.

“Recently, cryptocurrency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order.”

China has since ordered a shutdown of Bitcoin mining in its Sichuan province and told banks to stop supporting crypto transactions, along with the latest series of restrictions on crypto which has made prices tumble.

Binance in Britain

Recently, a top financial regulator in Britain has ordered Binance, the world’s largest cryptocurrency exchange, to cease regulated activity in the country, the latest effort by a world government to limit crypto-related businesses.

The Financial Conduct Authority followed its prohibitions on Binance with a warning to customers: Be wary of advertisements “promising high returns on investments in crypto asset or crypto asset-related products.” The U.K.’s decision closely mirrors that of Japan, where finance regulators in the last week notified Binance that it is not authorized to do business in the country.

The regulatory warning highlights the inherent tension surrounding digital currencies, which is growing in popularity amongst new investors regardless of skepticism from governments and legacy financial institutions. These traditional financial institutions warn and are wary of digital currencies due to their volatility and their use by bad actors to facilitate crime.

The crypto market’s extreme unpredictability was in the spotlight last week as hundreds of billions of dollars in value evaporated almost in an instant following the news of China’s crackdown on Bitcoin mining. However, as of Monday evening, Bitcoin was trading up more than 6% around $34,500, and the total cryptocurrency market hovered near $1.4 trillion, according to CoinMarketCap.

Consumers in the U.K. still will be able to use Binance for activities the FCA doesn’t regulate, like buying and selling Bitcoin.

Crypto in the USA

In the United States, the chair of the Securities and Exchange Commission called for a federal watchdog to oversee crypto exchanges since no single market regulator has clear jurisdiction over them.

“Right now the exchange's trading in these crypto-assets do not have a regulatory framework, either at the SEC or our sister agency, the Commodity Futures Trading Commission,” SEC Chair Gary Gensler told Congress last month.

In more recent news, the Biden administration officials have started a review of potential oversight measures tied to cryptocurrency’s potential uses to facilitate crime. Another key issue for policymakers is the tax avoidance crypto traders partake in. The White House and the Treasury Department are backing a new plan to target cryptocurrency as part of a broader effort to ensure tax compliance.

While cryptocurrency investors in the United States can still trade tokens and exchange them for cash, other investment vehicles are not widely available as they are in many other countries all over the globe. Some investment managers are seeking regulatory approval for Bitcoin exchange-traded funds, while other financial institutions are seeking to place crypto alongside their investments that comprise retirement plans.

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