China declares crypto transactions illegal

By Laura Berrill
China's central bank announces transactions of crypto-currencies illegal, banning Bitcoin

The People’s Bank of China stated: "Virtual currency-related business activities are illegal financial activities, seriously endangering the safety of people's assets".

The country is one of the world's largest crypto-currency markets and fluctuations there often impact the global price of crypto-currencies.

With the announcement, the price of Bitcoin fell by more than $2,000 (£1,460).

The move is the latest in China's national crackdown on what it sees as a volatile, speculative investment at best and a way to launder money at worst.

Official ban since 2019

Trading crypto-currency has officially been banned in China since 2019, but has continued online through foreign exchanges. However, there has been a significant crackdown this year. In May, state institutions warned buyers they would have no protection for continuing to trade Bitcoin and other currencies online and in June, they told banks and other payment platforms to stop enabling transactions.

There were also bans on "mining" the currencies, which is the trade of using powerful computers to make new coins.

However this latest announcement is the clearest indication yet that China wants to shut down crypto-currency trading in all its forms. The statement also makes it clear those involved in "illegal financial activities" are committing a crime and will be prosecuted. Additionally, foreign websites providing such services to Chinese citizens online is also an illegal activity, it added.

One of the world’s main mining centres

The technology at the core of many crypto-currencies, including Bitcoin, relies on many distributed computers verifying and checking transactions on a giant shared ledger known as the blockchain. As a reward, new "coins" are randomly awarded to those who take part in this work - known as crypto "mining".

China, with its relatively low electricity costs and cheaper computer hardware, has long been one of the world's main centres for mining.

The crackdown has already hit the mining industry - in September 2019, China accounted for 75% of the world's Bitcoin energy use. By April 2021, that was down to 46%.

 

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