China’s central bank on Friday said all financial
transactions involving cryptocurrencies are illegal, sounding the death knell
for the digital trade in China after a crackdown on the volatile currencies.
The global values of cryptocurrencies including Bitcoin have
massively fluctuated over the past year partly due to Chinese regulations,
which have sought to prevent speculation and money laundering.
“Virtual currency-related business activities are illegal
financial activities,” the People’s Bank of China (PBOC) said in an online
statement Friday, adding that offenders would be “investigated for criminal
liability in accordance with the law.”
The notice bans all related financial activities involving
cryptocurrencies, such as trading crypto, selling tokens, transactions
involving virtual currency derivatives and “illegal fundraising”.
Bitcoin, which had already been falling before the
announcement, sank by as much as 8.9 percent to $41,019 in European afternoon
trading before recovering slightly later in the day.
The central bank said that in recent years trading of
Bitcoin and other virtual currencies had become “widespread, disrupting
economic and financial order, giving rise to money laundering, illegal
fund-raising, fraud, pyramid schemes and other illegal and criminal
activities.”
This was “seriously endangering the safety of people’s
assets,” the PBOC said.
While crypto creation and trading have been illegal in China
since 2019, further crackdowns this year by Beijing warned banks to halt
related transactions and closed much of the country’s vast network of bitcoin
miners.
Friday’s statement by the central bank sent the strongest
yet signal that China is closed to crypto.
– Control -Bitcoin, the world’s largest digital currency,
and other cryptos cannot be traced by a country’s central bank, making them
difficult to regulate.
Analysts say China fears the proliferation of illicit
investments and fundraising from cryptocurrency in the world’s second-biggest
economy, which also has strict rules around the outflow of capital.
The crypto crackdown also opens the gates for China to
introduce its own digital currency, already in the pipeline, allowing the
central government to monitor transactions.
In June, Chinese officials said more than 1,000 people had
been arrested for using the profits from crime to buy cryptocurrencies.
Several key Chinese provinces have banned the operation of
cryptocurrency mines since the start of this year, with one region accounting
for eight percent of the computing power needed to run the global blockchain —
a set of online ledgers to record bitcoin transactions.
Bitcoin values tumbled in May on the back of a warning by
Beijing to investors against speculative trading in cryptocurrencies.
“China’s ban on all cryptocurrency trading activity will
have some short-term impact on currency valuation, but long-term implications
are likely to be muted,” said Ganesh Viswanath Natraj, Assistant Professor of Finance
at Warwick Business School.
“This ban will result in the migration of crypto investment
opportunities to other hubs in Asia, such as Singapore’s launch of the DBS
digital currency exchange earlier this month,” he added.
AFP
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