Bitcoin plummets as China declares all cryptocurrency transactions illegal

The Chinese government has intensified its crackdown on cryptocurrencies by declaring that all crypto-related transactions are “illegal”.

On Friday, Bitcoin fell by 5.49 percent to about $42,000, while ethereum slumped by 7.71 percent to $2,899, according to data from coinmarketcap.com.

In May, the Chinese government pledged to crack down on Bitcoin mining and trading.

It had placed a ban on financial firms and payment institutions from offering services related to cryptocurrency transactions.

In a Q&A posted to its website on Friday, the People’s Bank of China (PBOC) said that all “virtual currency-related business activities are illegal financial activities.”

The bank said that as cryptocurrencies including Bitcoin and Ethereum are issued by non-monetary authorities, “they are not legal and should not and cannot be used as currency in the market.”

“Virtual currency does not have the same legal status as legal currency,” the statement partly reads.

The PBOC said that services offering to trade, order matching, token issuance and derivatives for virtual currencies are strictly prohibited.

Activities considered illegal cover a range of operations, such as buying and selling virtual assets as a central counterparty and providing intermediary or pricing services for crypto transactions.

“Those who carry out related illegal financial activities (that) constitute a crime shall be investigated for criminal responsibility in accordance with the law,” it said.

The bank specifically called out the services offered by offshore crypto exchanges to Chinese customers via online platforms.

“The provision of services by overseas virtual currency exchanges to Chinese residents through the internet is also an illegal financial activity,” it said.

The PBOC warned that local employees at foreign crypto exchanges that continue to operate illegally, and those who provide services such as marketing and payments to them will be investigated in accordance with the law.

It added that the Chinese government will “resolutely clamp down on virtual currency speculation and related financial activities and misbehaviour to safeguard people’s properties and maintain economic, financial and social order.”

Another notice released on Friday by China’s National Development and Reform Commission banned all crypto mining as part of China’s pledges to reduce carbon emissions to meet climate change goals.

The commission said such activities contribute little to China’s economic growth, spawn risks and hamper carbon neutrality.

In February 2021, the Central Bank of Nigeria (CBN) issued a circular to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.