China bans all cryptocurrency transactions

(Bloomberg) – China has banned all cryptocurrency transactions and vowed to end illegal mining, dealing the hardest hit yet to the trillion-dollar industry.

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Transactions related to cryptocurrencies will be considered illicit financial activities, including services provided by offshore exchanges, the People’s Bank of China reported in its website. He added that cryptocurrencies, including bitcoin and tether, are not fiat currencies and cannot circulate.

It is the toughest move China has ever taken against cryptocurrencies and strikes the heart of a market that has exploded this year and has attracted enthusiasts like billionaire Elon Musk. China has long expressed its discontent with cryptocurrencies for its links to fraud and money laundering, as well as excessive use of energy.

Bitcoin tumbled on the announcement, falling 7% to about $ 41,500 as of 8:26 am in New York. China’s strict focus is part of the reason why the price of bitcoin plummeted in May and has struggled to regain its previous all-time highs above $ 60,000.

Bitcoin prices sank as China vows to intensify crackdown

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Bitcoin prices sank as China vows to intensify crackdown

While speculators are likely to remain in mainland China, activity has already shifted out of the country over the years amid increasingly stringent regulations, says Clara Medalie, research director at data provider Kaiko.

“News from China certainly affects the markets because it can shake up market sentiment, but the actual effect of another Chinese ban has minimal impact on the underlying structure of the market at this time,” he noted.

China is home to a large concentration of the world’s cryptocurrency miners, who require huge amounts of energy and therefore go against the nation’s efforts to curb greenhouse gas emissions. The country is a dominant player in the cryptoassets sector and, as of April, had a 46% share of the global hash rate, a measure of the computing power used in mining and processing, according to the Electricity Consumption Index. from the Cambridge Bitcoin.

Investors should expect a “knee-jerk price reaction as China blows the wind off bitcoin,” said Antoni Trenchev, co-founder of cryptocurrency lender Nexo. “The recent rally from just under $ 40,000 has probably run its course for now.”

Bitcoin and other virtual currencies are back on the defensive after rebounding from July lows. In the United States, regulators are also issuing strong warnings to the industry, which is at risk of repeating the toxic culture prior to the 2008 financial crisis. Earlier this month, the Securities and Exchange Commission (SEC) in English) sent a notice to Coinbase Global Inc. that it could be sued for offering accounts with high interest rates.

Vijay Ayyar, Asia Pacific region director for the Luno cryptocurrency exchange in Singapore, said that while the Chinese government has made similar statements in the past, it is “a slightly nervous environment for cryptocurrencies with recent comments. from the SEC and the general macro environment with the Evergrande news. Therefore, any comment of this nature will cause a massive sale of risk assets ”.

Original Note:

China Bans Crypto Transactions, Vows to Stop Illegal Mining (2)

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