China Extends Crackdown Against Cryptocurrencies

China’s fight against cryptocurrencies such as Bitcoin and Etherum continues, after that country’s central bank issued a new directive.

The People’s Bank of China summoned a number of major banks and lenders to tell them they must not provide crypto-related services, CNBC reported.

This is the latest move by Chinese authorities to stem the use of cryptocurrencies. Last week regional authorities in China began cracking down on Bitcoin and cryptocurrency mining projects, after financial institutions and payment companies were banned from providing services related to crypto transactions.

China clampdown

China accounts for more than half of all Bitcoin production worldwide, but the country’s State Council in May vowed to clamp down on bitcoin mining and trading as part of a long-running policy.

The move was one factor behind a Bitcoin sell-off that wiped $1 trillion (£710bn) off the value of all cryptocurrencies.

But now cryptocurrencies have suffered a fresh blow after the People’s Bank of China said it had urged several payment firms and banks to clamp down on cryptocurrency speculation.

According to CNBC, the People’s Bank of China said it had summoned major lenders including the Industrial and Commercial Bank of China and the Agricultural Bank of China, and Alipay, to tell them they must not provide crypto-related services.

Alipay reportedly said Monday it would “continue to conduct a comprehensive investigation and strike against virtual currency transactions” and “intensify” its crackdown on crypto.

“We reiterate that Alipay does not conduct or participate in any business activity related to virtual currencies and does not provide any assistant technical service or capability,” the company was quoted by CNBC as saying.

“Alipay will immediately cut its payment service related to any virtual currency transaction it spots. Alipay will firmly remove any merchant involved in virtual currency transactions,” it reportedly added.

Environmental impact

The fresh clampdown had predictable impact on Bitcoin, and its price fell to a two-week low Monday on news that China’s clampdown on crypto mining has extended to the southwestern province of Sichuan, a region known for its rich hydropower resources.

The value of Bitcoin had already been hit hard after Tesla’s Elon Musk last month said the electric car maker will no longer accept Bitcoin payments from customers, due to environmental concerns about its generation.

It should be remembered that Bitcoin mining uses large amounts of energy, much of it derived from the burning of fossil fuel.

Essentially this is because Bitcoin is created when high-powered computers compete against other machines to solve complex mathematical puzzles, a process known as mining.

At current rates, Bitcoin mining uses about the same amount of energy annually as the Netherlands did in 2019, data from the University of Cambridge and the International Energy Agency has reportedly shown.

Bitcoin opposition

And cryptocurrency is also viewed with concern by senior officials in Western nations as well.

Last month for example the governor of the Bank of England (BoE), Andrew Bailey, said cryptocurrencies “have no intrinsic value” and people should only buy cryptocurrencies if they are prepared to lose all their money.

BoE governor Bailey then one step further and said cryptocurrencies and similar assets were a danger to the public.

“Crypto-assets,” as the central bank’s official labels bitcoin and the rest, present a danger to the public, Bailey told the British Parliament’s Treasury Committee.

It should be remembered that the Bank of England in September 2014 had warned that Bitcoin could pose a threat to financial stability in the UK should it see widespread adoption.

Despite this Bitcoin has its supporters and champions.

Earlier this month El Salvador became the first country in the world to accept Bitcoin as legal tender, after that country’s legislator approved President Nayib Bukele’s proposal to embrace the cryptocurrency.

But following that the World Bank rejected a request from El Salvador to help with the implementation of Bitcoin as legal tender.