China Deems All Cryptocurrency Transactions Illegal

The Chinese Central Bank ruled on Friday, September 24, that all financial transactions involving cryptocurrencies were now illegal, leading to a drop in the price of these virtual currencies. The values ​​of the latter have already fluctuated massively during the year, in part due to regulations in China.

“Business activities related to virtual currencies are illegal financial activities”, the Chinese Central Bank (PBOC) said in an online statement. She added that violators would do “Under investigation for criminal liability, in accordance with the law”. The Chinese decision therefore prohibits, in particular, trading in virtual currencies, the sale of tokens, transactions involving virtual currency derivatives and “Illegal fundraisers”.

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The sentence seriously heckled the price of the most famous cryptocurrency, bitcoin. It yielded 6.2%, to 41,941 dollars (35,700 euros) around 1:10 p.m., according to data compiled by Bloomberg. Other cryptocurrencies also fell sharply: ethereum fell 10.7% to $ 2,806, and the entire market erased nearly $ 150 billion from its valuation, to $ 1,850 billion, according to the CoinMarketCap site, which lists more than 12,000 cryptocurrencies.

Fight against money laundering and fraud

The Chinese Central Bank’s decision “Caught investors off guard; however, it should come as no surprise that China continues to demonstrate a tough stance on cryptocurrencies ”, underlines specialist independent analyst Timo Emden.

During the last years, “Trade and speculation around bitcoin and other virtual currencies have become widespread, disrupting the economic and financial order, giving rise to money laundering, illegal fundraising, fraud, pyramid schemes and other illegal and criminal activities ”, again denounced the Central Bank in its press release.

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In June, Chinese officials reported the arrest of more than 1,000 people suspected of using criminal resources to purchase cryptocurrency. These phenomena “Seriously compromise the security of personal property”, noted the Central Bank.

Bitcoin had already fallen sharply in May, when Beijing’s warnings against the sector escalated. Beijing is also trying to limit the activity of “Mines”, these infrastructures essential to the functioning of the decentralized currency network, but very energy intensive, while electricity prices are inflating throughout the world.

A potential Chinese digital currency

But Friday’s announcement is the strongest signal Beijing sent to cryptocurrencies to date. Bitcoin and other cryptocurrencies cannot be traced by a central bank, making it difficult to regulate them. Analysts say China fears the proliferation of illicit investment and fundraising using cryptocurrency in the world’s second-largest economy, where outflows are tightly regulated.

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This crackdown on the use of cryptocurrencies could also be a way for China to set up its own digital currency, already in the pipes, which would facilitate the monitoring of transactions by the central power. The cryptocurrency market is accustomed to violent price movements: in twelve months, the price of bitcoin has risen from around $ 10,000 in September 2020 to an all-time high of nearly $ 65,000 in April, before a sharp correction that had driven prices below $ 30,000 in June.

The World with AFP

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