China deems crypto transactions illegal, bitcoin loses $2K

Key points -

l Chinese central bank announced that all crypto transactions are illegal

l Bitcoin fell by nearly nearly 6% to $42,124.73, according to Coin Metrics

On Friday, the People’s Bank of China (PBOC) declared that all cryptocurrency transactions are illegal, wiping out the gains made by bitcoin in the past two days.

Bitcoin fell by nearly $2,000 to $42,800 after this announcement, erasing Thursday’s 3% gain. The cryptocurrency was trading 3.66% lower at $42,176.35 on the day at 12:30 PM ET.

In a statement issued on Friday, the Chinese central bank reiterated its harsh stance against cryptocurrency trading activities, saying that virtual tokens such as bitcoin and ether are not legal tender. Cryptocurrencies “should not, and are not capable of being circulated in the market and used as currencies,” it said.

Naming bitcoin, ether, and tether as examples, the central bank said cryptocurrencies are issued by nonmonetary authorities, use encryption technologies and exist in digital form, and shouldn’t be circulated and used in the market as currencies.

With this announcement, the Chinese central bank has intensified its crackdown on cryptocurrency, which was earlier triggered by the shutdown of mining operations in the country.

The central bank made it clear that it was illegal for overseas exchanges that provide cryptocurrency services for residents in China through the internet.

The statement was dated September 15 but it was only posted onto the central bank’s website at 5 PM local time on Friday.

The statement gave local governments “full play” to monitor their regions and flag early warnings. Wall Street Journal reported that the statement vowed to crack down on “illegal financial activities” related to cryptocurrencies, and investigate employees of foreign cryptocurrency exchanges inside China as well as others in the industry who continued to advertise or provide crypto-related services.

The PBOC banned banks and non-bank payment institutions such as Ant Group from providing services related to virtual currency. In July, authorities told a Beijing-based software company to shut down over its involvement with crypto trading.

Meanwhile, the U.S. Treasury Department is planning an oversight framework for the cryptocurrency industry, especially for stablecoins. This year stablecoins have jumped from $30 billion in circulation in January to about $125 billion as of mid-September.

(With inputs from Wall Street Journal)
Picture Credits- Reuters