China bans cryptocurrency – All you need to know
China’s central bank announced that all transactions of crypto-currencies are illegal, effectively banning cryptocurrencies, such as trading crypto, selling tokens. Know details here.
China bans cryptocurrency 2021: China’s central bank, the People’s Bank of China, on September 24, 2021, announced that all transactions of crypto-currencies are illegal, effectively banning financial activities involving cryptocurrencies, such as trading crypto, selling tokens, transactions involving virtual currency derivatives. China had banned trading cryptocurrency in 2019 but the nation remained as one of the world's largest cryptocurrency markets. The price of the world’s largest cryptocurrency Bitcoin fell by almost 10 per cent to around $40,000 after China issued a nationwide ban on cryptocurrency mining.
"Virtual currency-related business activities are illegal financial activities, it seriously endangers the safety of people's assets,” said the People's Bank of China. “And foreign websites that provide such services to Chinese citizens online is also an illegal activity,” added China’s Central Bank.
Also read: Cryptocurrency Bill – All You Need to Know, Indian government stance on cryptocurrencies
Why did China ban cryptocurrency?
China’s central bank, the People’s Bank of China, said that trading of Bitcoin and other virtual currencies had become widespread and ‘disrupting economic and financial order, giving rise to money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities.’
China had banned trading cryptocurrency in 2019 but the nation remained as one of the world's largest cryptocurrency markets. Therefore, in order to shut down cryptocurrency mining in all its forms, China made a significant crackdown in 2021.
May 2021: China banned banks and payment firms from providing services related to cryptocurrency transactions. It also warned investors against speculative crypto trading. The National Internet Finance Association of China, the Clearing Association of China and the China Banking Association, and the Payment issued a warning that consumers would have no protection if they faced any losses during crypto-trading.
June 2021: The People's Bank of China completely ordered several banks and payment companies to not provide any services such as clearing, settlement, or trading environment for cryptocurrency transactions. The Agricultural Bank of China and China's Postal Savings Bank also followed the suit.
China ban on crypto-trading platforms - Significance
Making crypto transactions illegal
Changpeng Zhao in China who had founded the world’s biggest cryptocurrency exchange Binance moved to Japan within months of the Chinese crackdown on crypto trading platforms. Smaller nations like El Salvador have recently adopted Bitcoin as legal tender to foster financial inclusion and economic growth while in May 2021, China’s State Council vowed to crack down on Bitcoin trading and mining and create its own digital currency Yuan which will not use the blockchain technology like the cryptocurrencies.
Create its own digital currency
Economy experts state China’s ban on cryptocurrency trading has come at a time when China’s central bank, the People’s Bank of China has been testing its own digital currency, the Chinese Yuan, since 2014. The digital Yuan aims at replacing and digitizing cash and coin. Chinese authorities banned initial coin offerings (ICOs) in 2017. The digital Yuan will be issued by the People's Bank of China (PBOC) unlike Bitcoin which is not controlled by any central authority. This will allow the government to keep track of how money flows around China’s economy, detect any illegal flow of funds, and the internationalization of the Yuan currency.
What is the People's Bank of China (PBOC)?
The People's Bank of China is the central bank of the People's Republic of China. The PBOC is located in Beijing.
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