China’s central bank has declared all transactions that involve Bitcoin or other virtual currency as illegal in a new campaign to prevent the transactions using unofficial digital currency.
The notice on Friday was a scathing attack on Bitcoin, Ethereum and other digital currencies can disrupt the system of finance and can be employed for money laundering and other crimes.
“Virtual derivative transactions in currency are considered to be illegal financial transactions and are strictly forbidden,” the People’s Bank of China declared via its web site.
The value of Bitcoin decreased by more than 9% up to $41,085, during the following hours following the announcement. This was also the case for many other crypto-tokens. Ethereum fell by 10%, dropping from $3,100 to about $2,800.
Chinese banks were prohibited from dealing with cryptocurrency in 2013, however, they were issued with a notice in the year. The move was in response to concerns that official the mining and trading of cryptocurrency could continue to be in operation or the system of state-run financial institutions may be at risk of being exposed to the risk of.
Cryptocurrencies are a popular choice for investors because they offer anonymity and flexibility however Chinese authorities are concerned that they could undermine the Chinese Communist Party’s authority over financial markets. They believe they can help hide the proceeds of criminal activities.
The People’s Bank of China is creating an electronic version of the country’s currency, the yuan, for cashless transactions, which can be tracked and monitored by Beijing.
In other countries, regulators have warned more frequently that cryptocurrencies require more oversight. For instance, in the U.S., Gary Gensler who is the head of the Securities and Exchange Commission, has stated that investors need more security on the market for cryptocurrency, which he said was “rife with scams, fraud and misuse” and compared with”the “Wild Wild West.”
The SEC has won many cases against fraudsters who use crypto, however Gensler states that the agency must get Congress to grant it more authority and resources to effectively control the crypto market.
Regulators in China are also trying to control cryptocurrency mining, a highly intensive process that requires a lot of energy to create digital currencies. This is why miners have been transferring their businesses from China.
A few years back, China alone accounted for about three-quarters of the energy used in crypto mining and was by far the largest globally in accordance with the Cambridge Bitcoin Electricity Consumption index. At the time of April in the wake of the most recent crackdown China’s share was dwindling to 46 percent. This is still higher than the No. 2 nation, the United States, at less than 17%.