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The People's Bank of China Made All Crypto-Related Transactions Illegal

Bitcoin
(Image credit: Shutterstock)

China has finally expanded its crypto-crackdown outside the mining industry. The People's Bank of China (PBOC) today declared that all transactions involving virtual currencies—with one major exception that we'll discuss in a little bit—are illegal.

The PBOC said when it issued new crypto-related rules in June that "virtual currency trading speculation activities disrupt the normal economic and financial order, breed the risk of illegal and criminal activities such as illegal cross-border asset transfer and money laundering, and seriously infringe on the property safety of the people."

However, much of the Chinese government's attention went to cryptocurrency mining operations, which have been outlawed in provinces throughout the country. But now it seems the PBOC is finishing what it started three months ago, with the regulator issuing an extensive statement that reads in part:

"Virtual currency does not have the same legal status as legal currency. Virtual currencies such as Bitcoin, Ether, and [Tether] have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed accounts or similar technologies, and exist in digital form. They are not legal and should not and cannot be used as currency in the market."

It also said that "virtual currency-related business activities are illegal financial activities," that "the provision of services by overseas virtual currency exchanges to Chinese residents through the Internet is also an illegal financial activity," and that "there are legal risks involved in virtual currency investment transactions."

The statement also repeatedly mentions the PBOC's intention to collaborate with other Chinese regulators and law enforcement agencies to "severely crack down" on illegal activities, financial and otherwise, related to virtual currencies. It also wants to restrict access to online information regarding the use of those currencies.

CoinDesk reported that this is the first PBOC statement to specifically mention Tether, a popular stablecoin whose value is tied to the U.S. Dollar, as well as Bitcoin and Ether. The latter two have seen dramatic price decreases (a 4.2 percent drop in Bitcoin's case and a 7.1 percent drop in Ether's) following the PBOC's declaration.

But it's worth noting that not every virtual currency will be affected by the PBOC's new restrictions. There is one major exception: the digital yuan known as e-CNY. These new restrictions mean e-CNY won't have any true competition, whether it's from cryptocurrencies like Bitcoin or stablecoins like Tether, within China.

The PBOC announced in July that e-CNY had passed more than 70.7 million transactions related to a combined $5.3 billion (34.5 billion yuan) since its debut. That puts China's efforts well ahead of similar central bank distributed currencies, which many countries have only just started to seriously explore in recent months.

Promoting the state-backed virtual currency hasn't been the official motivation for cracking down on cryptocurrencies, of course. Instead, China's leaders have repeatedly said that environmental concerns led them to shut down mining operations and, in the PBOC's case, that cryptocurrencies undermine the country's financial structure.

Yet it wouldn't be a surprise if the PBOC's new rules are followed by the announcement that e-CNY will soon be available in more regions, or that it suddenly and oh-so-surprisingly became even more popular following this declaration.

  • Alvar "Miles" Udell
    Now if the UK, EU, and USA would follow suit...
    Reply
  • VforV
    The fact that all these anti-crypto measures took 3 months to gradually block all of it in China, was actually a blessing in disguise for crypto. Why?

    Because it got hit by moderate repeated punches over 3 months period, now if this would have been 1 big hit KO - everything thrown at once - then we would have had another big crypto crash, like we had in the past and it would have stayed down for a long time, again like we seen in the past.

    The fact that it did not happen like the worst scenario 1 hit KO, means that crypto again can shrug it of, take it on the chin and bounce back again.

    At this point the resilience of crypto is much stronger than in 2017-18, so it would need a much bigger anti-crypto force to hit it for crypto to crash and burn.
    Reply
  • spongiemaster
    Alvar Miles Udell said:
    Now if the UK, EU, and USA would follow suit...
    You're missing why China is doing this. This has nothing to do with anything said in China's public statement. China has their own crypto currency, as mentioned in the article, which oddly enough is still legal, so China is not anti-crypto. This is 100% about control. China cannot prevent their own people from transferring assets out of the country through crypto currency that the gov't doesn't control, that is why China has banned them all. This is actually a good thing for the future of cryptocurrency that China just removed themselves from being a major player in global crypto currency.
    Reply
  • Kamen Rider Blade
    Alvar Miles Udell said:
    Now if the UK, EU, and USA would follow suit...
    Now if only every other Nation State would follow suit.
    Reply
  • digitalgriffin
    Cards are in supply and are sitting on shelves. It's a sign the market it weakening. But still way over inflated.

    December will either make it break gpu prices. The mining bomb on eth will mean people will have to switch to dogecoin. With all that gpu hardware switching on a low profit coin the profitability will crash. It will be interesting to see what happens.
    Reply
  • chalabam
    Worst for China. In the future China will need to gain crypto the hard way.
    Reply
  • Chung Leong
    Alvar Miles Udell said:
    Now if the UK, EU, and USA would follow suit...

    Without crypto how would politicians pay for cocaine and underage girls without the risk of detection? I expect no actions.
    Reply
  • LolaGT
    China is only banning it to promote their own government backed crypto, as that is what totalitarian governments do.
    Good for China unless you are one of their subjects, meaning the move is bad for anyone else, as usual.
    Reply
  • Howardohyea
    spongiemaster said:
    China has their own crypto currency, as mentioned in the article, which oddly enough is still legal, so China is not anti-crypto. This is 100% about control.
    China have their own? I'm not aware of any, but then, I agree with the control part, the government will definitely want to promote CNY and keep it under their control
    Reply
  • Jamotech
    Chung Leong said:
    Without crypto how would politicians pay for cocaine and underage girls without the risk of detection? I expect no actions.
    Yes without crypto, no one has ever paid for ‘illegal’ things with cash. All countries should follow an oppressive, authoritarian country’s lead to ban Crypto, Winnie the Pooh, Brad Pitt, Tiananmen square massacre, Youtube…. The ban is all about having control and power. We should be thankful that we have the option of having crypto and not watch our hard earned savings become debased by our government’s infinite money printing.
    Reply