The Economic Daily which is Chinas state owned media outlet has indicated that the government might announce even tighter regulations on cryptocurrencies and stablecoins due to the downfall of the Terra ecosystem.
The outlet detailed the collapse of TerraUSD and Luna, explaining the workings of the algorithmic stablecoin. It used the so called black swan event to praise the Chinese government’s decision to ban cryptocurrency.
After banning crypto exchanges back in 2017, the Chinese government has been hardening its position on crypto again since mid-2021. Multiple agencies warned of the risk of investing in crypto, and a major crackdown on mining within the country took place.
Colin Wu who is a China-focused cryptocurrency reporter, cleared up the misconception around the ban, stating that the laws don’t allow institutions to provide crypto services “but they don’t prohibit ordinary people from using cryptocurrencies.
In early May, a Shanghai court found that Bitcoin is subject to property rights, laws and regulations as its value, scarcity and disposability meet the definition of virtual property according to the court. Following the last round of restrictions, traders began increasingly using offshore exchanges or P2P platforms for all of their activities.
Wu says there is a high probability that the Chinese government would impose even tighter restrictions or even complete bans on stablecoins to prohibit ownership, transfer, purchase and sale of the assets.
