China uses ‘Luna crisis’ to reinforce crypto ban

According to South China Morning Poststate media China are using the collapse of Luna, which leads to the decline of stablecoins TerraUSD (UST), to reinforce the cryptocurrency trading ban introduced by the government last year.

Crisis in crypto trading gives China a new reason to warn of the dangers of cryptocurrencies Reuters

“The latest case demonstrates timely and effective action on the part of the country’s regulatory agencies,” the newspaper Economic Daily of the Chinese state published in an editorial on May 15.

The event that Luna dominated news related to cryptocurrencies over the past week, after the value of stablecoin UST was no longer pegged to USD and trading halted on May 12. The current value of this coin hovers around 15 US cents. The UST relies on a complex algorithmic interaction with Luna to counterbalance the maintenance of the pegged rate to the USD. But now Luna has almost collapsed and its value is less than 1 US cent.

The crisis in cryptocurrency trading has given the Beijing government a new reason to warn the public of the dangers of crypto assets, after nearly a year of banning trading over concerns about financial stability.

“Once called ‘digital gold’ by crypto experts, cryptocurrencies are showing evidence of a high degree of risk. Cryptocurrency prices can also be easily manipulated without anything of real value to back them,” reads the editorial. Economic Daily widely reposted by other state media.

It is known that the news about Luna and electronic money was a hot topic on China’s Weibo for the past several days, but social traffic from related hashtags was largely restricted on May 16. “In fact, the fact that these content has entered the trending list shows that many Chinese are following the development of crypto assets,” said Yang Wenna, an analyst at International Finance Corporation, speak.

China has a complicated attitude towards blockchain. Although promoting blockchain as a technology important for the future, but the Beijing government has restricted access and related activities to cryptocurrencies for many years. In 2017, the country banned initial coin offerings (ICOs), and four years later banned all crypto-related transactions.

In response to cryptocurrencies, China has developed a digital yuan (e-CNY), which is not blockchain-based, managed through a database controlled by the People’s Bank of China (PBOC). control. It has been tested in several cities over the past few years and is accelerating its rollout this year. Tencent Holdings’ WeChat Pay and Ant Group’s Alipay also expand e-CNY support.