China’s central bank announced on Friday that all cryptocurrency-related transactions are illegal in the country and must be prohibited, citing national security concerns and the “safety of people’s assets.” Foreign exchanges are also prohibited from providing services to users in the world’s most populous country.
In a joint statement, ten Chinese government agencies pledged to collaborate closely in order to maintain a “high pressure” crackdown on cryptocurrency trading in the country. Separate orders were issued by the People’s Bank of China prohibiting internet, financial, and payment companies from facilitating cryptocurrency trading on their platforms.
Cryptocurrencies such as Bitcoin and Tether, according to the central bank, cannot be circulated in the market because they are not fiat currency. The rise in cryptocurrency use has disrupted the “economic and financial order,” leading to an increase in “money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities,” according to the report.
Offenders will be “investigated for criminal liability in accordance with the law,” the central bank warned.
The People’s Bank of China said in a statement that the Chinese government will “resolutely clamp down on virtual currency speculation, and related financial activities and misbehavior in order to safeguard people’s properties and maintain economic, financial, and social order.”
The move has already caused some crypto traders to panic, causing the price of bitcoin and several other currencies to plummet. At the time of publication, Bitcoin was down 5.5 percent.
China, which is home to some of the world’s largest crypto mining operations, is also pursuing those companies. The National Development and Reform Commission announced that it would begin a “imperative” nationwide cleanup of cryptocurrency mining.
This isn’t the first time China has announced a crackdown on cryptocurrency-related activities, but until now, many government agencies had refused to work together on such efforts.
For several years, Chinese regulators have considered prohibiting crypto mining. However, in recent months, a number of local businesses have begun to embrace cryptocurrency. In March, Meitu, a Chinese app developer, spent $40 million on Bitcoin and Ether.
Some people are upbeat. “China has banned crypto more times than one can count,” Vijay Ayyar, head of Asia Pacific business at Singapore-based crypto exchange Luno, said in a tweet.
The effect of US regulators
Cryptocurrencies have had a rocky start to the week, with fears that Evergrande’s problems will have ramifications for the Chinese and global economies, prompting a selloff in riskier assets.
The crypto markets are also being influenced by the regulatory environment in the US.
The Securities and Exchange Commission (SEC), and particularly its chairman Gary Gensler, have recently made several comments about the SEC’s role in potentially regulating crypto, specifically targeting some of the new lending products, staking, and stable coins that have piqued investor interest.
“Crypto markets are in an extremely frail state overall, and these sorts of downswings speak to that; there’s a degree of panic in the air,” Joseph Edwards, head of research at cryptocurrency broker Enigma Securities said in an interview.
“Crypto continues to exist in a grey area of legality across the board in China.”