China’s central bank on Friday said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for the digital trade in China after a crackdown on the volatile currencies.
The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations, which have sought to prevent speculation and money laundering.
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| According to the notice issued on Friday, Bitcoin, Ethereum, and other digital currencies disrupt the financial system and are used in money laundering and other criminal activities. |
Bitcoin prices dropped following the announcement and hit $42,232 after slipping 5% around 3:30 pm. The second-biggest token, Ethereum, dropped 6.3% to $2,888. Solana sunk 6.9% to $134, Litecoin lost 5.9% to $149 and Cardano was 2.4% lower at $2.15.
“Virtual currency-related business activities are illegal financial activities,” the People's Bank of China (PBOC) said in an online statement on Friday, adding that offenders would be “investigated for criminal liability in accordance with the law”.
The notice bans all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives, and “illegal fundraising”.
The People’s Bank of China said that in recent years, trading of Bitcoin and other virtual currencies had become “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities”.
This was “seriously endangering the safety of people's assets,” the PBOC said.
While crypto creation and trading have been illegal in China since 2019, further crackdowns this year by Beijing warned banks to halt related transactions and closed much of the country’s vast network of bitcoin miners.
The crypto crackdown also opens the gates for China to introduce its digital currency, already in the pipeline, allowing the central government to monitor transactions.