China’s central bank announced last Friday that all cryptocurrencytransactions are illegal andmust be prohibited as part of a sweeping crackdown on digital trading. The ruling has had asignificant impact on the worldwide value of cryptocurrencies such as Bitcoin and Ethereum.Following the statement, bitcoin values plummeted, reaching $42,232 at about 3:30 p.m., a lossof 5%. Ethereum, the second-largest coin, fell 6.3 percent to $2,888. Solana was down 6.9% to$134, Litecoin was down 5.9% to $149, and Cardano was down 2.4 percent to $2.15.The People’s Bank of Chinastated in a statement on its website that the government will”resolutely clamp down on virtual currency speculation, and rel
China’s central bank announced last Friday that all cryptocurrency transactions are illegal and must be prohibited as part of a sweeping crackdown on digital trading. The ruling has had a significant impact on the worldwide value of cryptocurrencies such as Bitcoin and Ethereum.
Following the statement, bitcoin values plummeted, reaching $42,232 at about 3:30 p.m., a loss of 5%. Ethereum, the second-largest coin, fell 6.3 percent to $2,888. Solana was down 6.9% to $134, Litecoin was down 5.9% to $149, and Cardano was down 2.4 percent to $2.15.
The People’s Bank of China stated in a statement on its website that the 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 statement stated that “virtual currency-related business activities are illegal financial activities,” and that violators would be “investigated for criminal liability in accordance with the law.”
Ten agencies, such as the central bank, banking, securities, and foreign exchange authorities, have pledged to work together to combat “illegal” cryptocurrency activities. This is the first time Beijing-based regulators have banded together to expressly prohibit all cryptocurrency-related activity.
“In the history of crypto market regulation in China, this is the most direct, most comprehensive regulatory framework involving the largest number of ministries,” said Winston Ma, adjunct professor at NYU Law School.
Governments from Asia to the United States are concerned that privately controlled extremely volatile digital currencies might undermine their governance of the financial and monetary systems, raise systemic risk, foster financial crime, and harm investors.
According to an announcement on the National Development and Reform Commission’s main website, the decision on virtual currency mining was made as part of the country’s efforts to preserve energy and reduce carbon emissions.
The National Development and Reform Commission of China said that it will try to cut off financial assistance and power supplies to mining, which it claims create hazards and impedes carbon neutrality targets.
The People’s Bank of China has stated that cryptocurrencies should not be circulated and that foreign exchanges should not provide services to Chinese investors. It also made it illegal for financial institutions, payment providers, and internet businesses to facilitate bitcoin trading throughout the country.
Cryptocurrency and blockchain-related stocks were also affected by the decision, but they recovered some of their losses in early U.S. trade.
Riot Blockchain (RIOT.O), Marathon Digital (MARA.O), and Bit Digital (BTBT.O), all listed in the United States, dropped between 2.5 and 5%, while San Francisco crypto exchange Coinbase Global (COIN.O) lost just over 1%.
Despite the surprise, economists believe the crackdown will have a little long-term impact on global crypto-asset values as businesses continue to use crypto products and services.
However, the extent to which big crypto exchanges and payment businesses were exposed was not visible. Binance, the largest cryptocurrency exchange in the world, has been prohibited in China since 2017, according to a spokesman. Coinbase’s representative refused to respond. PayPal (PYPL.O), a global payment business, does not provide crypto services in China, according to a spokesman.
OKEx and Huobi, both of which began in China but are now headquartered in the United States, are expected to be the worst hit because they still have some Chinese customers, according to experts. The value of tokens connected with the two exchanges has dropped by more than 20%. Response requests were not returned immediately by the exchanges.
However, the Chinese government has previously failed to prevent internet users from circumventing its regulations.
Before May, virtual currency mining was a huge industry in China, accounting for over half of the global’s crypto supply, but miners have begun going abroad.
“The losers in all of this are plainly the Chinese,” Christopher Bendiksen, head of research at digital asset management CoinShares, said. “They will now lose around $6 billion in annual mining revenue, all of which will flow to the remaining global mining regions,” he continued, naming Kazakhstan, Russia, and the United States as examples.