Pan Gongsheng, recently appointed head of the People’s Bank of China (PBOC), the country’s central bank, said the agency will severely crack down on illegal financial activities such as cryptocurrency transactions in the country, local media reported on Saturday. Meanwhile, Hong Kong regulators announced restrictions on retail access to certain “complex” digital asset products.

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  • Pan delivered the comments in a speech titled “Report on the Financial Work of the State Council” on Saturday during a meeting of the Standing Committee of the 14th National People’s Congress.
  • Pan said the central bank will embark on a severe crackdown on fake gold exchanges, third-party wealth management companies, illegal fund-raising and digital currency transactions, local media reported.
  • Beyond reducing risk to consumers, Pan also reiterated the need for the PBOC to effectively implement macroeconomic controls, strengthen financial supervision, and expand domestic demand, among other measures. 
  • Pan became PBOC Governor in July this year. He is tasked with tackling growing national debt and an escalating crisis in the nation’s housing sector.
  • In September 2021, the PBOC declared all crypto transactions such as trading and mining illegal. Despite the crypto ban, The Wall Street Journal reported in August that China remains the largest market for international cryptocurrency exchange Binance. Chinese investors traded around US$90 billion in crypto on the exchange for the month of May this year alone.
  • Over the past year, authorities have positioned special administrative zone Hong Kong as a more permissive regulatory testing area for digital assets. In a Forkast interview, Angelina Kwan, chief executive officer of Stratford Finance and a former regulator at the Securities and Futures Commission of Hong Kong (SFC), said Hong Kong now serves as a crypto “sandbox” for mainland China.
  • However, in the wake of a US$180 million fraud at cryptocurrency exchange JPEX reported in September, local authorities are tightening their stance on the industry. That comes amid widespread retail interest in digital asset products such as exchange traded funds (ETFs) ahead of a potential approval of a spot Bitcoin ETF in the U.S.
  • The SFC and Hong Kong Monetary Authority (HKMA) on Friday issued a joint circular updating its policy on retail access to virtual asset (VA) products and services. The circular pointed to the risks posed to retail customers by certain “complex” VAs.
  • “As these risks are not reasonably likely to be understood by a retail investor, VA-related products are very likely to be considered complex products,” the two local regulators said.
  • “VA-related products which are considered complex products should only be offered to professional investors,” it continued. “For example, an overseas VA non-derivative ETF would very likely be considered a complex product and it should only be offered to professional investors.”
  • The circular said that, before issuance, VA intermediaries will now have to assess whether their client has sufficient understanding of digital asset investment and the net worth required to cover any losses.
  • “If a client does not possess such knowledge, the intermediary may only proceed if it has provided adequate training to the client on the nature and risks of virtual assets,” the circular said.

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