China Deals The Final Blow To Cryptocurrencies

The central bank of China (PBOC) has redoubled its pressure on cryptocurrencies, officially declaring that all transactions related to these digital assets are illegal and should be prohibited , thus sending a stronger message against this activity. . All cryptocurrencies, including bitcoin and ether, will be prohibited from circulating in the market in any of its forms, as revealed by the People’s Bank of China on its website .

All cryptocurrency-related transactions, including services provided by foreign exchange houses to Chinese residents, are considered illicit financial activities at the moment .

Any type of transaction will be illegal
In this way, China deals the final blow to cryptocurrencies. After several notices and statements , the authorities have gone further this time. It is not the first time that state agencies or the central bank have tried to encircle this type of activity, but this time any activity related to cryptocurrencies has been effectively and officially prohibited.

The PBOC is the first major central bank to launch an official crackdown on these assets. Other institutions, such as the US Fed or the European Central Bank have, to date, limited themselves to warning about the dangers of digital currencies as an investment and marking differences between the properties of money and these assets.

What does this prohibition mean?
Chinese citizens and companies will not be able to carry out the following operations: exchange rate services between official currencies (yuan, euro, dollar …) and cryptocurrencies (bitcoin, cardano), exchange services (‘exchange’) between different cryptocurrencies, the clearing and settlement of assets as a central counterparty, the provision of cryptocurrency price information, the issuance of ‘tokens’ and derivatives transactions linked to cryptocurrencies.

In this way, the Chinese central bank has published a long statement divided into five sections (each with different subsections) in which all the risks that cryptocurrencies pose to the economy, stability and people are explained . In addition to influencing its illegality on several occasions during the note, specifically naming bitcoin or ether.

In the statement issued this Friday, the central bank highlights that “cryptocurrencies do not have the same status as legal currency. Virtual currencies such as bitcoin, ether and tether are issued by non-monetary authorities, using encryption technology and distributed accounts or technologies. similar, and only exist in digital format. They are not legal and must not and cannot be used , as currency of use in circulation. ”

Bitcoin falls sharply after China’s central bank statement
In addition, the National Development and Reform Commission (NDRC) , whose mission is to reform the country, has also announced that it will prohibit any type of financial support for new cryptocurrency mining projects. That same Chinese body will not allow such projects to use energy from the domestic market.

Cryptocurrency mining is very energy intensive and can weigh on Beijing’s environmental goals, as well as affecting consumers who have to live with blackouts in areas where most of this crypto industry is concentrated.

All of this is part of the large-scale crackdown on Chinese markets by the authorities , in an attempt to exert greater control over the economy, achieve more sustainable, inclusive and egalitarian growth. China is at a key moment, after years of exorbitant growth (which has generated great inequalities), now the Chinese Communist Party is looking for formulas to distribute that wealth and create a sustainable economy in all senses.

Bitcoin and ethereum sink
This is having implications for the markets. In the case of cryptocurrencies, bitcoin falls around 6% after the Chinese regulator’s statement and loses $ 43,000. Ethereum, for its part, fell 7% to $ 2,850 and Solana fell more than 8% to $ 134.

The decision of the Chinese authorities could have truncated the good run of these assets (even their technical aspect was improving) , which seemed to have recovered from the debacle they suffered during the month of July, when bitcoin even lost $ 30,000 . If there is something that defines, for now, cryptocurrencies, it is their great volatility, with daily fluctuations that easily exceed 5%.

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