China’s Central Bank Declares Cryptocurrency Transactions Illegal, Sending Bitcoin Down 6%

After a crackdown on the volatile currencies, China’s central bank declared all financial transactions using cryptocurrencies to be unlawful on Friday, effectively putting an end to digital commerce in the country.

The worldwide value of cryptocurrencies, including Bitcoin, has changed dramatically over the last year, owing in part to Chinese laws aimed at preventing speculation and money laundering. As of 5 p.m. IST on September 5, the price of bitcoin in India was Rs. 33.7 lakhs.

The People’s Bank of China (PBOC) announced in an online statement Friday that “virtual currency-related business activities are illegal financial activities,” and that violators would be “investigated for criminal liability in accordance with the law.”
The notification prohibits all associated financial operations using cryptocurrencies, including cryptocurrency trading, token sales, virtual currency derivatives transactions, and “illegal fundraising.”

After China’s latest crackdown on cryptocurrencies, Bitcoin’s losses widened on Friday.

Bitcoin, which had been decreasing in value before the news, fell as high as 6.0 percent before reducing losses to $42,256 (approximately Rs. 31 lakhs), a loss of 5.5 percent.
Trading of Bitcoin and other virtual currencies has been “widespread” in recent years, according to the central bank, upsetting “widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities.”

The PBOC stated that this was “seriously endangering the safety of people’s assets.”

Whereas the manufacture and trade of cryptocurrencies have been banned in China since 2019, the government has increased its crackdowns this year, warning banks to cease associated transactions and shut down most of the country’s massive network of Bitcoin miners.
The central bank’s announcement on Thursday provided the clearest indication yet that China is anti-crypto.

Control
Bitcoin, the world’s largest digital currency, and other cryptos are difficult to control since they cannot be tracked by a country’s central bank.
Analysts say China is concerned about the spread of illicit cryptocurrency investments and fundraisers in the world’s second-largest economy, which also has tight capital outflow regulations.