The People’s Bank of China announced on Friday, September 24 that all crypto-related transactions will be considered illicit financial activity by the state. This blanket ban on trading and mining by the government is the toughest blow yet to the Chinese crypto industry.
Banned crypto trading activities also include off-shore exchanges according to the financial authority. Moreover, the national bank also added that cryptocurrencies are not fiat currencies thus cannot be circulated because these are not legal tender under Chinese laws.
This final blow sent crypto exchanges including Huobi Global and Binance to sever business ties with their mainland Chinese clientele.
Du Jun, Huobi Group co-founder, said in a statement to Reuters that on the day the announcement was released, the company started to take corrective measures. Even existing accounts from mainland Chinese clients will be cleaned up by the end of the year.
Crypto wallet service provider TokenPocket also sent a notice to its Chinese clientele that the group would terminate services in mainland China. The company said that it would actively embrace the regulations posed by the government.
This blanket regulation makes it hard for mainland investors to buy and sell digital assets but the new regulations have yet to declare whether crypto ownership is illegal. Most investors can still own crypto assets and trade them overseas.
According to Clara Medalie, a researcher at Kaiko crypto data provider, crypto activities have already shifted out of China amidst the stringent regulations over the years.
‘News out of China definitely impacts markets because it can shake market sentiment, but the actual effect of another Chinese ban has minimal impact on underlying market structure at this point,’ Medalie said.
However, Antoni Trenchev, co-founder of crypto lending company Nexo, warned investors about the knee-jerk price reaction for Bitcoin amidst the China crackdown. ‘The recent rebound from just below $40,000 has likely run its course for now,’ Trenchev stated.
China has long been the epicentre of Bitcoin mining despite tight regulations by the government on crypto activities.
According to the data released by Cambridge Bitcoin Electricity Consumption Index, around 46% of the global hash rate was accounted for by Chinese miners in April. This becomes a concern for the nation and its efforts to curb greenhouse gas emissions since crypto mining requires tons of energy to accomplish.
Moreover, the Chinese government has long since expressed disapproval of crypto-related activities with concerns over money laundering and fraud. The drastic move to outlaw crypto transactions and mining closed off loopholes left from previous regulatory notices.
Find out the latest cryptocurrency updates in China’s digital asset crackdown here at Cryptoshimbun!
