China’s central bank on Friday said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for digital currencies in China after a crackdown on the volatile trade.
Bitcoin slumped in the wake of the announcement, falling 8% to about $41,000 as of 9 a.m. in New York. The country is home to a large concentration of the world’s crypto miners and as recently as April had a 46% share of the global hash rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption Index. The global values of cryptocurrencies including Bitcoin have massively fluctuated over the past year partly due to Chinese regulations, which have sought to prevent speculation and money laundering.
“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China (PBOC) said in an online statement Friday, adding that offenders would be “investigated for criminal liability in accordance with the law.”
The notice bans all related financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives and “illegal fundraising”.
The central bank said that in recent years the “trading and speculation of Bitcoin and other virtual currencies have become widespread, disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes and other illegal and criminal activities.”
In June, Chinese officials said more than 1,000 people had been arrested for using the profits from crime to buy cryptocurrencies.
Several Chinese provinces had already banned the operation of cryptocurrency mines since the start of this year, with one region accounting for eight percent of the computing power needed to run the global blockchain — a set of online ledgers to record bitcoin transactions.
Bitcoin values tumbled in May on the back of a warning by Beijing to investors against speculative trading in cryptocurrencies.
