China has banned all cryptocurrency transactions and vowed to root out digital asset mining, dealing the industry’s strongest blow yet.
AndHe said The People’s Bank of China says that cryptocurrency-related transactions are illegal financial activity, including services provided by offshore platforms.
He added that cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be traded. Bitcoin tumbled in the wake of the announcement and fell 8 percent to around $40,000.
Chinese officials are going so far as to crack down on cryptocurrency trading for links to fraud, money laundering and excessive energy use.
China has rules that prevent banks from providing crypto-related services. To get around these rules, traders moved to trading platforms located outside the country.
China’s ban on all cryptocurrency trading activities has some short-term impact on the currency’s valuation. But the long-term effects are likely to be absent.
While there are still Chinese speculators in the country, the activity has moved out of the country over the years.
The massive energy consumption of mining is also part of the reason why the industry is under scrutiny. In a separate statement, China’s Economic Planning Agency said it is an urgent task to root out currency mining and the security crackdown is important to achieving carbon targets.
China is facing a severe energy crisis in the form of distressed commodities from aluminum to steel. Many industries have seen their energy supplies shrink in the past few weeks.
The country is home to a large concentration of miners in the world and recently had 46 percent of the global hash rate. It is a measure of computing power used in mining and processing.
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The country’s latest crackdown on cryptocurrency
Chinese regulators have long been extreme in their views, and these comments are not new. But the interesting part is why they keep making these statements. This may be because they felt the relentless activity in China, and thus the need to move forward.
China’s renewed crackdown on crypto mining and trading activity began in May. It was the first time that senior officials chose to mine cryptocurrency at a national level since it was dropped in 2019 from a proposed list of dirty industries to be phased out.
The move caused the price of cryptocurrencies to crash, with Bitcoin losing about half of its value between April and July of this year.
While the market has regained some of its gains since then. But it is still well below the all-time high of $63,000.
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