China Internet Finance Association Issues Fourth Crypto Risk Warning Since 2020

The China Internet Finance Association, alongside multiple regulatory bodies, released a warning on Dec. 5 regarding illegal virtual currency activities, marking its first such announcement in three years. The association has issued four major policy statements at critical market junctures since 2020. On April 13, 2022, it published guidelines prohibiting the use of Bitcoin and other virtual currencies for NFT pricing and settlement, which led to the rapid cooling of China's digital collectibles market and the shutdown of numerous platforms. The May 18, 2021 announcement, which reiterated that virtual currency trading contracts lack legal protection and banned financial institutions from providing related services, triggered a market crash the following day, with Bitcoin dropping over 30% from above $43,000 to below $30,000. An April 2, 2020 warning highlighted risks associated with offshore trading platforms, subsequently leading to intensified regulatory crackdowns on over-the-counter trading channels and widespread account freezes.