People’s Bank of China bans all crypto-currency transactions
China’s central bank sounded the death knell for digital trade in China as it moved to ban all cryptocurrency transactions on Friday, terming them illegal across the length and breadth of the country. The move has hit cryptocurrencies including bitcoin which fell 9%.
Bitcoin and other crypto-currencies could not be circulated in the market as they did not constitute fiat currency, the central bank of China stated.
In a statement posted on the People’s Bank of China website, market regulators and the Ministry of Public Security said that the trade in crypto-currency was “disrupting the economic and financial order, breeding illegal and criminal activities such as gambling, illegal fund-raising, fraud, pyramid schemes, and money laundering, and seriously endangering the safety of people’s property”.
In a joint statement, 10 Chinese government agencies pledged to maintain a “high pressure” crackdown on the trading of crypto-currencies.
The central bank also warned of “the risks of virtual currency trading speculation”.
Offenders, the central bank warned, would be “investigated for criminal liability in accordance with the law.”
The ban, Chinese government insisted, was necessary to “maintain national security and social stability”.
The move is already causing panic in the market, destabilizing the price of Bitcoin and several other currencies. By Friday evening, the value of Bitcoin had lost as much as 9% of its value. After rising to $53,000 on Monday the world’s largest cryptocurrency dropped to $40,693 by Friday.
In May this year, Bitcoin values tumbled after a warning by Beijing to investors against speculative trading in crypto-currencies.
Bitcoin, the world’s largest digital currency, and other crypto-currencies, cannot be traced by any country’s central bank, making them difficult to regulate.
Meanwhile, the National Development and Reform Commission said that it was launching a nationwide clean-up of cryptocurrency mining — a task it said was “imperative.”
The crackdown also opens China to introduce its own digital currency, already in the pipeline, allowing the government in Beijing to monitor all transactions.
The crypto-currencies, such as Bitcoin, suffered wild fluctuations in their values last year, in part because of increasing regulations in China to prevent speculation and money laundering.
In June, Chinese officials had said that more than 1,000 people had been arrested for buying crypto-currencies with profits earned from criminal endeavors.
Before Friday’s pronouncement, several Chinese provinces had already banned mining crypto-currencies because of high strain on power supply.
Additionally, overseas exchanges will be barred from serving mainland investors and financial institutions, and payment processing firms and internet companies facilitating crypto-currency trades will be blocked by the Chinese government.
Companies would also not be allowed to use a variety of terms for crypto-currency in their names and in their business activities. The list of banned terms includes ‘virtual currency’, ‘virtual assets’, ‘encrypted currencies’ and ‘encrypted assets’.