All cryptocurrency transactions are illegal: China

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Recently, all cryptocurrency transactions  were declared illegal by the Chinese central bank. Thus, effectively banning digital tokens such as Bitcoin.

“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said, warning it “seriously endangers the safety of people’s assets”.

China is among those countries that have the world’s largest markets for cryptocurrencies. Any variation there would often impact the global price of cryptocurrencies.

Bitcoin’s price fell by more than $2,000 (£1,460) in the wake of the Chinese announcement.

It is the latest in the country’s national restriction on what it sees as an unstable, abstract investment at best – and a way to filter money at worst.

Since 2019, China has banned the official trading of cryptocurrency but has continued online through foreign exchanges.

Nevertheless, there has been an important curb this year.

In May, buyers were given a warning by the Chinese state intuitions that they would have no protection for continuing cryptocurrency trade online.

This was because the government officials vowed to increase pressure on the industry regarding the matter.

In June, it told banks to stop easing transactions and issued bans on “mining” the currencies. It means the trade of using powerful computers to make new coins.

And this announcement is the clearest indication yet that China wants to stop crypto-currency trading in any form. Hence, it makes clear that those who are involved in “illegal financial activities” are committing a crime and will be prosecuted.

Furthermore, any foreign website providing such services to Chinese people online will also be considered an illegal activity.

Mining migration

Cryptocurrencies rely on various dispersed computers verifying and checking transactions on a giant shared ledger known as the blockchain. New “coins” are casually awarded to those taking part in this work – known as crypto “mining” – as a reward.

China has long been one of the world’s main centres for mining because of its fairly low electricity costs and cheaper computer hardware.

The Chinese crackdown has already hit the mining industry.

In September 2019, China reported – 75% of the world’s Bitcoin energy use. By April 2021, the percentage fell to 46.

 

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