Chinese associations flag virtual currency risks

Chinese industrial associations of internet finance, banking, and payment and clearing on Tuesday issued stern warnings on the risks of virtual currencies.

The cautions come amid rounds of asset boom-and-bust and urge institutions and consumers to distance themselves from the cyber tokens.

Financial institution members, payment institutions, and other agencies shall not use virtual currency to price products or services. Also, internet platform enterprises shall not provide services for virtual currency-related business activities, read the announcement of the three organizations.

It is also not allowed to underwrite insurance businesses related to virtual currencies or bring virtual currencies into insurance liability coverage.

The announcement reminds consumers that virtual currencies have no real underlying value, and their prices can be easily manipulated. There are multiple risks in related speculative trading activities that lurk in the form of false assets and business failures.

Consumers are told to guard their personal bank accounts and not use them in operations such as the topping up or withdrawal of virtual currency accounts. Consumers must also guard against the illegal use and disclosure of personal information.

Virtual currencies, a type of virtual goods, are not issued by monetary authorities. It has no fiscal attributes such as legal compensation and cannot and should not circulate as a real currency.

The People's Bank of China, the central bank, and other departments have issued multiple documents demanding forestalling risks of speculation in virtual currency transactions.