- The People’s Bank of China (PBOC) has said that as cryptocurrencies don’t form a part of the payment system.
- On Friday, Bitcoin was perhaps one of the first one to react to the statement as its prices immediately dropped by 3.70% and was trading at US $42,455.50.
In a major crackdown on the cryptocurrency market, China’s central bank, The People’s Bank of China (PBOC), announced that all the cryptocurrencies in the country will now be deemed illegal and should be banned from trading.
PBOC on its website stated that as cryptos are not regulated and not considered as a mode of traditional payment, tokens/coins such as Bitcoin, Ethereum etc from now on will not be accepted in the market. This comes as a big jolt to the holders of the cryptocurrencies as this would mean that the services provided by the offshore exchanges to domestic residents will now be considered as illegal financial activity.
From now on all forms of cryptocurrency activities such as trading crypto, selling tokens, transactions involving virtual currency derivatives will be deemed as illegal fundraising and people or exchanges involved in such activities will be punished strictly.
Bitcoin almost immediately saw the impact as on Friday, it plummeted by 3.70% and was trading at US $42,455.50 with a 24-hour trading volume of US $34,32,53,43,044. Ethereum too slumped by 7.89% and was trading at US $2,859.91 with a 24-hour trading volume of US $18,84,53,19,699.
China strong crypto regulations
The PBOC further stated that it will be stepping up its monitoring of cryptocurrency transactions and will wipe out all forms of speculative investing. The PBOC along with 10 Chinese state authorities, the Cyberspace Administration of China and the Ministry of Public Security all agreed that the time has come to have a “coordination mechanism” ensure that illegal financial players do not in any cryptocurrency transactions.
This is not the first time that China took a harsh stand on virtual currencies. In fact, in May, the China’s State Council in a form of crypto crackdown had ordered ban on crypto mining in the country stating that the activity consumes massive amounts of energy. According to the Cambridge Bitcoin Electricity Consumption Index, China is a dominant player in crypto industry with a 46% share of the global hash rate.
In June, Chinese officials had arrested more than 1,000 individuals who were involved with cryptocurrency-related crimes in the country. That time too, Bitcoin saw a massive fall, leading to bearing markets for almost two months. Besides, the PBOC has also ordered the banks and non-bank payment institutions like Alibaba not to provide services related to crypto.
The crypto crackdown will also give the opportunity for China to introduce its own CBDC, which is in a testing phase at the moment, and it will allow the central government to monitor transactions on its platform. In fact, Di Gang, the Deputy Director of China’s Central Bank Digital Currency Research Institute had informed few months back that the CBDC pilot project is in advanced phase and could soon be issuing one.
China’s CBDC project, which is often dubbed as one of the most advanced pilot projects in the world, is a two-layer system with the PBOC controlling the core layer. The PBOC due to the scalability issue of the CBDC prefers to opt for a system that they can regulate and can manage.