The Economic Daily, China’s state-owned media organization, signaled that the country’s government may bring stricter regulations to manage cryptocurrencies, stablecoins, and other altcoins in the wake of the Terra aftermath. Terraform Labs went through one of the most challenging months in its history. The depeg of the TerraUSD/ UST and crash of the overall Terra ecosystem resulted in the collapse of the cryptocurrency industry earlier this month. Terra developers deployed their recovery plan with the launch of their LUNA 2.0 mainnet, also known as Phoenix-1, which went live last Saturday (May 28).
According to an article published today (May 31), the Economic Daily highlighted the collapse of Terra algorithmic stablecoins, explaining the functioning of TerraUSD/ UST and Terra LUNA. The article also used the “black swan” event to commend the Chinese government’s call to ban cryptocurrency.
Li Hualin, a reporter at the Economic Daily, said: “My country has been digging deeper into the cryptocurrency trading landscape and several other trading platforms. This has effectively stopped the transmission of this risk in the country and prevented unnecessary investment risks.”
He further went on to explain that “many other countries” are seeking to introduce stringent regulations in the wake of the Terra catastrophe. Additionally, he quoted Zhou Maohua, a researcher at the China Everbright Bank, to build a case for even more regulations within China: “In the coming months, China will also accelerate the completion of regulatory drawbacks, and bring stringent regulatory measures to reduce the risks introduced by stablecoins. This, in turn, will reduce the space for cryptocurrency debate, illegal financial activities, and other related criminal and fraudulent activities. Our main focus is to ensure the safety of the people.”
China Will Introduce Stringent Crypto Regulations
Following the ban of major cryptocurrency platforms back in 2017, the country’s government has been reinforcing its outlook on cryptocurrency and stablecoins since mid-2021. A lot of agencies and institutions pointed out the risk of crypto investments, and a major crackdown on crypto mining happened lately in the country.
A Chinese cryptocurrency reporter called Colin Wu cleared up the myths surrounding the crypto ban, reporting to Cointelegraph that the regulations don’t allow financial institutions to provide crypto services. However, they won’t stop people from trading cryptocurrencies as there’s no single law prohibiting it. “Financial institutions and enterprises are totally prohibited from trading or owning crypto in the country, but common people can own, purchase, and sell cryptocurrencies. Moreover, some local courts even consider them to be lawfully protected as digital property,” he added.
Earlier this month, a court in Shanghai found that Bitcoin (BTC) — the world’s largest and most popular cryptocurrency by market capitalization — is subject to property rights, regulations, and laws as its value, disposability, and shortage meet the conditions of virtual property.
In terms of how traders own cryptocurrencies in the first place, a study by Cointelegraph highlighted the increasing use of VPNs in the country. When the Chinese government rolled out restrictions previously, traders started using offshore platforms or peer-to-peer (P2P) exchanges to trade cryptocurrencies.
Wu further said that the Chinese government would likely roll out even tighter regulations or total bans on stablecoins to restrict the purchase, sale, ownership, and transfer of virtual assets — particularly for Tether. The Economic Daily also reported that the country’s decision to impose stringent regulations will “prevent crypto from becoming a tool for fraud, money laundering, and illicit trade.”