China State Media Issues Alert on Crypto Risks Amid Bitcoin Rally

China’s state-run media has once more cautioned investors against crypto investments as Bitcoin reached a two-year peak on Monday, near the $64,000 mark.

State-owned newspaper Economic Daily pointed out on Sunday that Bitcoin’s price rebound doesn’t mask the underlying risks associated with the digital asset.

“Investors should remain cautious about the risks associated with Bitcoin and products whose value is tied to cryptocurrencies,” it said.

The newspaper cited Beijing-based lawyer Xiao Sa, who noted the recent approval of Bitcoin Spot ETFs in the US. This approval has reduced the entry barrier for overseas investors and boosted market trading activity, he said.

He further emphasized that overseas Bitcoin ETF dealers cannot sell related financial products to Chinese citizens. Additionally, residents of mainland China are prohibited from directly purchasing related financial products using tools.

The article also quoted Zhao Wei, a senior researcher at OKX, who highlighted other concerns in the crypto market. These include rising macroeconomic uncertainty, the presence of unforeseen industry events, and unclear regulatory policies.

China’s Persistent Concerns About Crypto

The warning comes as Bitcoin has shot up by 50% this year, with much of the spike happening in the past few weeks, on the back of trading volume for US-listed bitcoin funds seeing a big jump. Last week, Bitcoin became a hot topic on various Chinese online platforms, like the microblogging site Weibo.

Chinese state media has persistently tried to caution against crypto involvement, citing concerns over capital flight and financial instability.

In Sept. 2021, the Chinese government took a significant step to ban cryptocurrencies by involving 10 different agencies. They declared various crypto-related activities illegal, categorizing them as illicit financial activities. This move aimed to curb the use and trading of cryptocurrencies within the country.

While the government has cracked down on these activities within the country, it has not outright banned individuals from possessing digital assets like Bitcoin or Ethereum.

Binance’s Success in China Despite Crypto Bans

These recent actions are not the first steps Beijing has taken against digital currencies. Back in 2017, China closed down its domestic crypto exchanges, effectively ending a speculative market that previously dominated around 90% of global Bitcoin trading.

Despite the ban on crypto trading, China paradoxically became the largest market for crypto exchange Binance last year.

Binance users based in China reportedly engaged in crypto trading amounting to about $90 billion within a month in 2023, representing around 20% of Binance’s total global trading volume. At that time, it is believed were over 900,000 active Binance users in China.