China took a big step and declared all types of transactions done in Bitcoin and other such virtual currencies illegal. It has also started a campaign to ban the use of digital currency in an unauthorized manner. The central bank of the People’s Bank of China (PBC) said in the notice that ‘bitcoin, ethereum (the ethereum blockchain) and other digital currencies have disrupted the financial system. It is being used for money laundering and other crimes.’
Chinese banks banned the cryptocurrency in 2013, but the government issued a reminder letter this year. This suggests that there is concern at the official level regarding the cryptocurrency. The government is concerned about the damage to the financial system due to transactions using such currencies.
Promoters of the cryptocurrency say it offers a degree of privacy and flexibility, but Chinese regulators worry they could undermine the ruling Communist Party’s control over the financial system. It is also said that it can help hide criminal activity.
PBC said virtual currencies have no legal tender status. Bitcoin and other cryptocurrencies such as Ethereum and Tether are not issued by monetary authorities and have no legal tender power and therefore should not be circulated as legal tender. All illegal financial activity is strictly prohibited and will be terminated in accordance with the law, PBC said.
The statement is an extension of the country’s intense regulation on cryptocurrencies, beginning with the State Council’s Financial Stability and Development Committee meeting in May. The Global Times said the meeting indicated that a further crackdown on virtual currency trading and mining activities is part of efforts to root out financial risks.
Government agencies will step up enforcement and prohibit power generation firms, especially small companies, from providing electricity for cryptocurrency mining activities, while strictly banning the own supply of electricity to mining firms, the statement said.
