PBOC Summons Alipay and Major Banks as China Escalates War on Crypto Trading

In a dramatic escalation of its cryptocurrency crackdown, the People’s Bank of China summoned executives from Alipay and several major state-owned banks on June 21, 2021, demanding they take immediate action to root out cryptocurrency trading on their platforms. The move came on the same day that Bitcoin plunged below $32,000 and more than 90% of China’s mining capacity was ordered offline, marking one of the darkest days in cryptocurrency market history.

TL;DR

• The PBOC ordered Alipay and major banks to crack down on crypto trading activities on June 21, 2021
• Bitcoin fell 8.6% to $32,540, while Ethereum dropped 12% to approximately $1,888
• China now has over 90% of its domestic Bitcoin mining capacity shuttered
• Financial institutions are prohibited from providing any crypto-related services
• The coordinated crackdown extends across Sichuan, Inner Mongolia, Yunnan, and Xinjiang provinces

The PBOC’s Directive

The People’s Bank of China issued a statement on Monday, June 21, confirming that it had called in representatives from Alipay — the ubiquitous payment platform operated by Alibaba affiliate Ant Group — along with several of China’s largest state-owned banks. The central bank instructed these financial institutions to thoroughly investigate and block any cryptocurrency trading activities flowing through their systems.

The directive reinforced an existing prohibition that barred financial institutions from offering cryptocurrency-related services, including accepting digital assets as payment, providing crypto custody, or facilitating transactions involving virtual currencies. The PBOC characterized the move as essential for protecting consumers and maintaining financial stability.

China’s central bank had first initiated its crackdown on crypto in May 2021, when banking and internet industry associations issued a joint statement published on the PBOC’s official WeChat account. That statement declared that cryptocurrency is not real currency and “should not and cannot be used as currency in the market,” while warning that speculative crypto trading “seriously infringes on the safety of people’s property and disrupts the normal economic and financial order.”

Market Devastation

The regulatory offensive delivered a crushing blow to cryptocurrency markets. Bitcoin, which had traded as high as $41,000 just the previous Tuesday, plummeted to $31,760 on Monday morning before recovering slightly to $32,540 by the afternoon — an 8.6% single-day decline. According to CoinMarketCap data, BTC settled at $31,676 while the total market capitalization of all cryptocurrencies contracted sharply.

Ethereum suffered even more severe losses, plunging approximately 12% to trade around $1,888 after having climbed above $2,600 earlier in the week. XRP also posted double-digit percentage declines. Dogecoin, which had become the poster child for retail crypto speculation, fell to approximately $0.25, dramatically lower than its May peak above $0.70.

The market downturn was not limited to a single day. It represented the continuation of a brutal selloff that had begun weeks earlier when China first signaled its intention to eliminate cryptocurrency mining and trading within its borders. Billions of dollars in market value were wiped out as fear gripped investors worldwide.

The Sichuan Mining Ban

Compounding the pressure from the PBOC’s banking directive, authorities in Sichuan Province delivered what amounted to a fatal blow to China’s Bitcoin mining industry. On Friday, June 18, the Sichuan Provincial Development and Reform Commission and the Sichuan Energy Bureau jointly ordered electricity companies to cut power to all cryptocurrency mining operations by Sunday, June 20.

The notice identified 26 specific firms suspected of operating mining facilities and required local power providers to immediately terminate electricity supply to any detected mining projects. New mining projects were also prohibited from receiving approval. By Sunday, the vast majority of Sichuan’s mining operations — which had previously made the province one of the world’s largest Bitcoin mining hubs thanks to its abundant and cheap hydropower — had gone dark.

Combined with earlier crackdowns in Inner Mongolia, Yunnan, and Xinjiang, the Sichuan ban meant that more than 90% of China’s total Bitcoin mining capacity had been effectively neutralized. Chinese-operated mining pools such as Huobi Pool, Binance Pool, and AntPool saw their hash rates plummet between 20% and 40% within a single 24-hour period.

The Rationale Behind the Crackdown

Chinese regulators articulated several justifications for the sweeping crackdown. Environmental concerns were paramount — Bitcoin mining’s enormous energy consumption had drawn criticism from climate advocates and government officials alike. Guan Dabo, an economist at Tsinghua University in Beijing, told the Financial Times that mining “doesn’t do any good to the national economic development or social development” and that it “consumes a lot of electricity that could be used for other purposes, especially at a time when provinces are facing electricity shortages.”

Financial stability was another core concern. Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at Renmin University of China, characterized the crackdown as consistent with a global trend of financial regulators tightening oversight of digital currency trading to prevent systemic financial risks and combat illegal activities such as money laundering.

Senior Chinese officials had stated in May 2021 that it was necessary to crack down on Bitcoin mining and trading and to “resolutely prevent the transmission of individual risks to the wider society.”

Global Implications

The crackdown’s effects rippled far beyond China’s borders. With roughly one-third of the global Bitcoin network’s processing power suddenly going offline, the hash rate decline was the steepest ever recorded. International miners in North America, Russia, and Kazakhstan anticipated an influx of displaced Chinese mining operations, but the transition was expected to take months and involve significant logistical challenges.

Mining equipment prices were forecast to collapse as desperate operators sought to offload hardware. Shentu Qingchun, CEO of Shenzhen-based blockchain company BankLedger, noted that the price of mining machines could dive in the short term, with many crypto miners dumping processing equipment and market willingness to absorb the oversupply remaining tepid.

For global cryptocurrency markets, the crackdown raised fundamental questions about regulatory risk. If the world’s second-largest economy could effectively eliminate crypto mining and trading within its borders virtually overnight, investors were forced to reconsider the assumption that cryptocurrency operated beyond the reach of sovereign governments.

Why This Matters

The events of June 21, 2021 represented a watershed moment in the relationship between cryptocurrency and government regulation. China’s coordinated assault — simultaneously targeting mining operations, financial institutions, and payment platforms — demonstrated that sovereign states retain enormous power to shape the cryptocurrency landscape, even for ostensibly decentralized networks. The crackdown accelerated the geographic decentralization of Bitcoin mining and forced the industry to mature beyond its dependence on a single jurisdiction. For investors and industry participants, the episode served as a stark reminder that regulatory risk remains one of the most significant and unpredictable variables in the cryptocurrency market.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk, and readers should conduct their own research before making investment decisions.