In a surprising streak of events, China has declared all cryptocurrency transactions in the country will be deemed illegal. China’s central bank in a note announced that all transactions involving cryptocurrencies are illegal and cited that it “seriously endangers the safety of people’s assets”. Also Read - Bitcoin scammers targeting iPhone users via dating apps: How to identify such scams, tips to stay safe
As quoted by a BBC report, while China is one of the largest cryptocurrency markets globally, its impact often has an impact on the global price of crypto-currencies. Following the Chinese announcement, Bitcoin’s price fell by more than $2,000 (roughly Rs 1,47,500). Also Read - WazirX received 377 legal requests in Apr-Sept 2021: List of actions taken
Reasons behind China’s ban on cryptocurrency transactions
– The People’s Bank of China in a Q&A posted on its website mentioned that services ‘offering trading, token issuance’ for digital currencies are strictly prohibited. Also Read - CoinSwitch Kuber valued at $1.9 billion, now second crypto unicorn in India
– The PBOC feels these digital coins to be ‘outside its regulatory ambit,’ being volatile are at worse used for money laundering.
– The central bank has even ordered banks and non-bank payment institutions like Alibaba affiliate Ant Group not to provide crypto-related services, as per CNBC report.
-China’s national crackdown on crypto is speculated to be initiated to fulfill its ‘climate targets’, as mining of bitcoins requires a vast amount of electricity.
Notably, this isn’t the first time China has taken such strict measures on crypto transactions. As cited by BBC, cryptocurrency trading has been officially banned in the country since 2019, although it has continued online via foreign exchanges. Banks and payment platforms were asked to stop facilitating transactions of crypto in June this year. Beijing’s announcement of a crackdown on crypto mining led to a sharp decline in bitcoin’s ‘processing power’ with several miners taking their equipment offline.
While the country is said to have a fear of ‘massive global meltdown’ in the digital currency, China is trying to make the first move in case of a crash, as per reports. Apparently, China’s central bank is said to be working on its very own digital currency. While China has been trying to ‘shut down crypto-currency trading in all its forms, other regulators like Federal Reserve in the US are also said to considering measures to restrict crypto use.