Chinese top regulators have today released a notice that clarifies their stance on cryptocurrencies. The notice specifies that digital currencies are not legal in the country, with the regulators pledging to crack down on the budding crypto industry. The renewed tough talk on cryptocurrencies has led to a sharp slump in the prices of crypto assets.
PBOC Cracks Down On Cryptocurrencies
China has taken a step further in tightening oversight of cryptocurrencies. In the regulatory notice originally published on September 15 but released on September 24, the People’s Bank of China — China’s central bank — indicated that cryptocurrency-related activities have recently skyrocketed, subsequently disrupting the country’s economic and financial order by giving rise to illegal and criminal activities. To prevent these types of risks from spreading further, Chinese regulators have clarified that digital currencies are not legal in the nation.
“Virtual currency-related business activities are illegal financial activities,” the notice reads. The latest directive targets all financial institutions and trading platforms that enable the conversion of Chinese yuan to crypto. Individuals found engaging in illegal cryptocurrency activities will be punished severely.
The statement also says that 10 Chinese state authorities, including the PBoC, the Ministry of Public Security, the Cyberspace Administration of China, have established a mechanism for early warning and putting an end to the hype in crypto trading and mining activities. Local authorities will be expected to inspect their grids for any unusual electricity consumption as well as their borders for all cryptocurrency mining operations.
With the skeptical stance of Chinese regulators towards cryptocurrencies, local police are expected to crack down on illicit activities facilitated by cryptos such as money laundering and gambling.
China’s latest remarks on crypto have had a negative impact on prices. Bitcoin, for instance, is trading 5.59% lower on the day. The flagship cryptocurrency dropped from over $44,000 to $41,000 shortly after China news hit the wires. Meanwhile, altcoins like Ethereum joined BTC in shedding value. ETH has lost 8.86% over the past 24 hours, having plummeted below the psychologically important $3K level.
Moreover, some pundits suggest that the unnecessary restrictions on bitcoin mining and trading will hamper the industry’s growth, pushing investors to move “a lot of capital” from China to Western nations.
China’s Rocky Relationship With Bitcoin
For years, China has been focused on trying to control the crypto industry. The nation started imposing strict regulations and impractical policies on bitcoin and cryptocurrency trading in 2017. At the time, Chinese authorities banned crypto exchanges from providing services to residents.
The country’s regulators have steadily tightened their grip this year, imposing a sweeping ban on crypto mining. This saw bitcoin mining operations shut down in Inner Mongolia, Sichuan, Xinjiang, and several other provinces.
Last month, China’s central bank announced that it had shut down 11 crypto exchanges in Shenzhen, alleging that these exchanges were in violation of foreign exchange rules and operating within the city despite the nationwide ban.
Notably, PBoC’s latest announcement does not go as far as to prohibit the ownership of virtual currencies. Time will tell whether the People’s Republic of China will move in that direction and ban cryptocurrency possession en masse.