China’s central bank announced on Friday, September 24th that they are declaring all cryptocurrency transactions illegal.
“Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said in a statement, later adding that it “seriously endangers the safety of people’s assets”.
China initially banned crypto trading through its domestic exchanges in 2019, saying that it was a way to suppress money laundering. Since this move, they have also continued to restrict citizens of China from continuing online foreign exchanges.
China is gradually shutting down crypto mining operations and not allowing new operations to emerge. China is also prosecuting people in the country caught participating in crypto-related activity.
Bitcoin and Ethereum prices have since fallen by around 10%, although it appears to be evening out since China’s moves have come as no surprise to analysts.
Crypto holders within China are now worrying that their assets will be frozen, so there is a sudden scramble for holders to get their hands on their assets.
But why the sudden crackdown? Is it really for the wellbeing of crypto holders?
Well, it might have something to do with the fact that China is currently testing out its own digital currency. The country is looking to hand out over £4.5 billion in digital currency to its residents in Beijing as part of a trial to test if the economy can survive on a purely digital currency.
The currency, called digital yuan, has been in development since 2014 but has been trialed with lotteries in the past. It is less like Bitcoin, which is “decentralized”, and is issued by a central authority, namely the People’s Bank of China. The aim is to digitize bank notes and coins in circulation.