The global bitcoin selloff continued over the weekend as China continued to suggest that action against the trading and mining of cryptocurrency is coming. Xinhua News, a mouthpiece of the Chinese Communist Party (CCP), said in a commentary published on Monday that there is “an urgent need to rectify the hype of virtual currency.”

The article warns consumers not to believe the myth of cryptocurrency, stating explicitly that “bitcoin is just a virtual commodity. It is not currency and will not become currency.” The commentary further points out that “financial institutions and payment institutions should not provide any form of support and services for virtual currency transactions.”

The article follows a meeting of the State Council’s Financial Stability and Development Committee – chaired by Vice-Premier Liu He, the country’s top advisor on economic and financial matters – during which further restrictions on digital currencies were discussed.

In an effort to promote economic stability, the Committee emphasised the need to support “prudent monetary policies” that strengthen the “real economy.”

The official Committee document specifically states the need to “crack down on bitcoin mining and trading behaviour.” However, it fell short of an outright ban on the digital currency. It also did not elaborate on the measures involved or the scale of the crackdown.

Following the statement, Coindesk reported that the Chinese cryptocurrency exchange platform Huobi had scaled back or suspended some of its services and products in certain countries and had stopped its miner hosting services in mainland China.

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“Due to recent dynamic changes in the market, in order to protect the interests of investors, a portion of services such as futures contracts, ETP, or other leveraged investment products are temporarily not available to new users from a few specified countries and regions,” the platform wrote.

The exchange did not disclose the specific countries and regions where it will stop the trading services and investment products.

Last week, three major Chinese financial institutions indicated that the country would crack down on cryptocurrency, after which bitcoin faced a rollercoaster week of trading. Over the weekend, the digital currency fell 16% to $31,800 before rising slightly on Monday to $36,000. Several major bitcoin miners reportedly ceased operations altogether, apparently deterred by the price plunge and uncompromising Beijing rhetoric.

China’s state-backed cryptocurrency

Meanwhile, China is pushing forward its state-backed digital currency, which was also mentioned by Xinhua News. The article highlighted the need to foster a “normal economic and financial order, and create a better environment for the official launch of China’s digital Renminbi.”

During the 2021 West Bund Financial Technology Frontier Forum held on Sunday, former President of the Bank of China, Li Lihui, echoed this sentiment.

“We should make the digital Renminbi the best central bank-backed digital currency in the world,” he said.

He emphasised building a sustainable and reliable digital Renminbi in a high-concurrency market while accelerating the construction of the domestic digital financial system. Li reiterated the need for stability in implementing China’s digital currency, saying that financial supervision should be integrated as a fundamental element of the e-Yuan.

Recently, China’s digital currency – backed by several major state banks – entered into a trial phase. Two weeks ago, the digital payment app Alipay, owned by the tech giant Alibaba, was incorporated into the preliminary rollout of the e-Yuan.

“The digital Renminbi is likely to change the financial landscape,” Li said. “The addition of a digital Renminbi as legal currency will be the first change. The second change is that the state-backed digital currency will gain ground among digital payment tools within the retail market.”

A report by GlobalData’s Thematic Research unveiled the underlying issues inherent in dealing with cryptocurrency, arguing that they aren’t backed by anything, don’t add value to anything and that their price is entirely based on hype and speculation.

China’s push to implement a state-backed digital currency can be seen as a move to take back control over the economy and to weed out private sector cryptocurrencies such as bitcoin and ethereum.