China Says All Crypto Transactions Are Illegal; Bitcoin tumbles |
BEIJING (AP) – China’s central bank on Friday declared all transactions involving Bitcoin and other virtual currencies illegal, stepping up a campaign to block the use of the unofficial digital currency.
Friday’s notice complained that Bitcoin, Ethereum and other digital currencies are disrupting the financial system and being used in money laundering and other crimes.
“Transactions in virtual currency derivatives are all illegal financial activities and are strictly prohibited,” the People’s Bank of China said on its website.
The price of Bitcoin fell more than 9%, to $ 41,085, within hours of the announcement, like most other crypto tokens. Ethereum slipped nearly 10%, from $ 3,100 to around $ 2,800.
Chinese banks were banned from handling cryptocurrencies in 2013, but the government issued a recall this year. This reflected official concern that cryptocurrency mining and trading could still continue or that the state-run financial system could be indirectly exposed to risk.
Cryptocurrency promoters say they allow anonymity and flexibility, but Chinese regulators fear weakening the ruling Communist Party’s control over the financial system and say they could help cover up criminal activity.
The People’s Bank of China is developing an electronic version of the country’s yuan for cashless transactions that can be tracked and controlled by Beijing.
Regulators in other countries have increasingly warned that cryptocurrencies require increased scrutiny. In the United States, Gary Gensler, chairman of the Securities and Exchange Commission, said investors need more protection in the cryptocurrency market, which he called “rife with frauds, scams and of abuse “and compared to the” Wild West “.
The SEC has won dozens of cases against crypto fraudsters, but Gensler says the agency needs Congress to give it more authority and funding to properly regulate the market.
Chinese regulators have also tried to curb cryptocurrency mining, a power-intensive process by which specialized computers generate digital currencies. As a result, the miners moved their activities out of China.
Two years ago, China alone accounted for about three-quarters of all electricity used for crypto mining, by far the largest in the world, according to the Cambridge Bitcoin Electricity Consumption Index. By April of this year, before the latest crackdown, China’s share had fallen to 46%. This still dominates the No. 2 country, the United States, at less than 17%.