The People’s Bank of China (PBOC) banned cryptocurrency trading on Friday, declaring that all activities related to this type of asset –from payments and trading to advertising– are now illegal. Bitcoin and ethereum dived 8% and 11% on the announcement, respectively.
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Cryptocurrency Trading Banned
“Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity,” the PBOC said, according to a CNBC translation.
Reuters reports that the regulator’s move was rooted in the premise that these assets entail a threat to national stability due to speculation.
George Zarya, CEO of Bequant crypto exchange in London, was quoted as saying: “China has been known to go to extremes with either very assertive statements and prosecutions to complete radio silence.”
"This time the point was made very clear that China will not support cryptocurrency market development as it goes against its policies of tightening up control over capital flow and big tech.”
The decision to ban cryptocurrency trading prohibits financial institutions, payment companies, and internet firms from facilitating trade or opening cryptocurrency accounts, as well as their promotion and advertising. The regulator will also strengthen the monitoring of these activities.
“The Chinese regulators have always been extreme in their views and these comments are not new,” said Vijay Ayyar, head of Asia Pacific at digital currency exchange Luno.
“They have said these things many times in the past. But the reaction is interesting purely because we are anyway in a slightly nervous environment for crypto with the recent SEC comments and overall macro environment with the Evergrande news. So any comments of this nature will cause a selloff in risky assets.”
The measure also means that all transactions related to cryptocurrencies, including services provided by foreign platforms to national residents, are illegal.
China has cranked the pressure on the industry amid heightened concern about the risks of fraud, money laundering, and the excessive energy use in crypto mining.
The nation's economic planning agency had said it was urgent to root out crypto mining to meet carbon emissions targets.
In the meantime, the PBOC is preparing its own digital currency as the Asian giant is set to spearhead the issuing of the world’s first digital currency by a central bank. The country has already tested a virtual version of the yuan in various provinces.