China Bans All Cryptocurrency Transactions

China’s central bank has said it considers all cryptocurrency transactions “illegal”, the country’s strongest indication yet of its hard line against digital tokens such as Bitcoin.

“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said in a Q&A, adding that the activity “seriously endangers the safety of people’s assets”.

The bank also indicated that it was also illegal for overseas exchanges to provide virtual currency transactions to Chinese citizens.

The bank said China would develop “new systems” to counter the risks posed by cryptocurrencies.

Volatility

The prices of Bitcoin and Ether, the two biggest cryptocurrencies, slumped by around 5 percent and 7 percent respectively in the hours following the bank’s statement.

In a separate statement the National Development and Reform Commission reiterated China’s policy of shutting down crypto mining operations and barring new mining projects.

China officially banned cryptocurrencies in 2019, but began taking stronger measures against crypto transactions and mining activities in May.

In June China told banks and payment platforms in the country to stop facilitating crypto transactions and issued bans for crypto miners.

Crypto mining

Such pronouncements have led to several cryptocurrency price drops over the course of this year, with Bitcoin remaining well below its current all-time high of more than $64,000 (£47,000), reached in mid-April.

The crackdown has also led crypto miners, which operate the power-intensive computing centres that generate new coins and process transactions, to establish themselves elsewhere.

In September 2019 China accounted for 75 percent of the world’s Bitcoin mining energy consumption, but by April 2021 this had dropped to 46 percent, according to the Cambridge Centre for Alternative Finance.

However, China remains one of the world’s biggest cryptocurrency markets, and the biggest single base for crypto miners.

The crackdown on cryptocurrencies is itself part of a broader tightening of digital controls in China that has affected everything from online gaming to social media celebrity culture.