China Says all Cryptocurrency Usage and Transactions Are Illegal

China has effectively moved to ban all cryptocurrency transactions in the country; this move by China’s central bank has led to the banning of all tokens, including bitcoin. “Virtual currency-related business activities are illegal financial activities,” the People’s Bank of China said, adding that cryptos “seriously endangers the safety of people’s assets.”

The announcement has caused significant fluctuations in the market. China is one of the largest crypto markets; hence any policy made in China would affect the market value. And since the wake of this announcement, the price of Bitcoin has fallen by $2,000.

This announcement has been the most recent crackdown on cryptocurrencies by the China government; they see digital coins as a way to launder money and as a speculative investment at best.

Crypto clampdown in the past

China had officially banned Crypto since 2019, but the online transaction continued. However, more and more crackdown measures that have been affected over the years have not been up to the recent crackdowns the government of China had made this year.

In May, the government had warned those who traded in Bitcoin that there would be no protection for them if they continued trading the cryptocurrencies with foreign exchanges. 

But this had little or no impact on Crypto activities in the country. Hence this year, they had decided to take it a step further,

The Central Bank went ahead to stop banks from facilitating payments and transactions and banned Crypto mining – mining is more frequent in China, and it is done by using powerful computers to make new coins and consequently make more money through Bitcoin.

But the most recent announcements are the best and most apparent indications that China is ready to take more steps to end all forms of crypto trading and exchanges in all their forms. 

And the statement made by the central bank implies that anyone caught will be prosecuted. Adding that all the crypto exchange websites that provide such services, such as Binance, to its citizens will be prosecuted too for illegal activities.

Bitcoin Mining Migration

The primary technology behind cryptocurrencies, including bitcoin, is supported mainly by distributed computers that verify and check transactions on a ledger known as a blockchain. 

As a result of these activities, coins are given to those who are part of this work – this process is known as mining.

China has been the haven of all crypto miners. This is due to their cheap cost and computer hardware. 

However, this current clampdown will reduce the rate of mining new coins. And because of the initial high rate of bitcoin mining going on there, gamers and other industries who depend primarily on electricity blame miners for the global shortage of powerful graphics cards – one of the tools used for processing cryptocurrencies.

In 2019, China had accounted for 75% of the world’s bitcoin energy, but in April 2021, that figure had fallen below 46%. The government is making more moves to reduce that number drastically to below 10%.

Many of the bitcoin miners have chosen other Crypto-friendly states to continue mining their bitcoin without being seen as breaking the law.