Why doesn't China allow cryptocurrency trading?

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In recent years, the Chinese government has imposed strict regulations on cryptocurrencies and banned related exchanges. The main reasons are the following:

  1. Financial risk control: The cryptocurrency market is very volatile, and speculators easily manipulate prices, causing instability in the financial market. The high anonymity of cryptocurrency transactions also facilitates illegal activities such as money laundering, smuggling, and terrorist financing, posing threats to national financial security.

  2. Protecting Investors’ Rights: The cryptocurrency market is plagued by information asymmetry and speculation. Many investors lack the necessary knowledge and risk awareness, making them susceptible to market manipulation. To safeguard investors’ interests, the Chinese government banned cryptocurrency trading and shut down related exchanges.

  3. Monetary policy control: The cryptocurrency market can interfere with key monetary policy tools such as money supply and interest rate regulation. To maintain the independence and effectiveness of its monetary policy, the Chinese government has taken steps to ban cryptocurrencies.

  4. Promoting the development of digital RMB: The Chinese government is dedicated to promoting digital currency, particularly the digital RMB. By banning cryptocurrencies, it has accelerated the research, development and promotion of the digital RMB.

  5. Preventing financial fraud and illegal capital flows: The cryptocurrency market is a breeding ground for financial fraud, where criminals lure investors with fake projects and exchanges to defraud them. To prevent this type of fraud and protect investors, as well as mitigate the risk of illegal capital flows where cryptocurrencies are used to evade regulatory scrutiny, the Chinese government has implemented the ban.

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