China urges Alipay, top banks to crack down on cryptocurrency trading

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China summoned officials from its biggest banks to a meeting to reiterate a ban on cryptocurrency services.

Representatives from Industrial and Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and payment service provider Alipay were reminded of rules that prohibit Chinese banks from engaging in crypto-related transactions, according to a statement from the central bank on Monday.

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The latest development is a sign that China will do whatever it takes to close any loopholes left in crypto trading. In May, China’s State Council -- the country’s cabinet -- called for a renewed crackdown on Bitcoin mining and trading activities.

China has longstanding rules that bar banks from offering crypto-related services. However, in the past few years, individuals have moved to trade the digital coins on over-the-counter platforms and even offshore exchanges.

Crypto activities “disrupt financial order and also breed risks of criminal activities like illegal cross-border asset transfers and money laundering,” according to the statement from China’s central bank.

The financial companies have pledged to step up inspections into crypto activity and close related accounts. They won’t offer account opening, clearing or settlement to assist crypto trading, they said.

China Construction Bank Corp., Postal Savings Bank of China Co. and Industrial Bank Co. were also at the meeting, according to the PBOC statement.

The country’s tough regulatory stance is a contrast to the US, where crypto trading is big business. Banks such as JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley are beginning to wade into the industry and offer products for wealthy clients that want access to the volatile asset class.

Bitcoin stayed near the day’s lows after China’s announcement, trading down 9 percent to $32,500 on Monday.

“This will of course cause some short-term volatility, but should not have mid- and long-term effects for Bitcoin,” said Antoni Trenchev, co-founder of Nexo, a crypto lender.

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