China’s central bank yesterday declared all crypto transactions illegal, sounding the alarm on the digital trade in China. This comes after a crackdown on volatile digital currencies.
Cryptocurrency prices, including Bitcoin, have recently fluctuated partly due to Chinese regulations preventing money laundering and speculation.
The People’s Bank of China (PBOC) declared in an online statement on Friday that virtual currency-related activities are illegal, adding that lawbreakers will be investigated for criminal activities as per the law.
This notice bans financial activities that involve cryptocurrencies, including trading and selling crypto, virtual currency derivatives transactions and “illegal fundraising”.
After the announcement, Bitcoin fell by around 5.5%, hitting $42,232 around 1000 GMT, but it later stabilized. By 1030 GMT, Bitcoin was trading down 5.0% at around $42,464.
The central bank noted that Bitcoin trading and other virtual currencies were widespread and disrupted economic and financial order in recent years. This led to money laundering, illegal fundraising, pyramid schemes, and other criminal activities. According to PBOC, this was seriously endangering people’s assets.
Cryptocurrency creation and trading have been banned in China since 2019, but further crackdowns this year warned banks to stop these transactions and closed most of the country’s Bitcoin miners networks.
Friday’s statement from the central bank made a strong signal that China is done with crypto.
Is It About Control?
Bitcoin is the world’s largest digital currency, and just like other cryptos, it cannot be traced by a country’s central bank and is almost impossible to regulate.
Analysts think that China fears the spread of unlawful investments and fundraising activities from cryptocurrency in the world’s second-largest economy, with stringent rules governing the outflow of capital.
This crypto crackdown may also open the gates for China’s digital currency, which is already in the pipeline, and allow the central government to monitor the transactions.
In June this year, Chinese officials claimed that more than 1,000 people had been arrested for buying cryptocurrencies using profits from crime.
Some key Chinese provinces also have banned mining cryptocurrency at the start of this year, with one region accounting for 8% of the computing power required by the entire global blockchain.
