The china’s central bank is in action against the crypto trading market. Bitcoin price slipped in trade from highs seen in early Friday after China’s central bank said it would crack down on cryptocurrency trading, banning overseas exchanges from providing services to mainland investors.
The world’s largest cryptocurrency by market capitalization slipped around 5% at $42,810.
The People’s Bank of China also said it will bar financial institutions, payment companies and Internet firms from facilitating cryptocurrency trading, and will strengthen monitoring of risks from such activities.
China’s central bank ban crypto
China’s central bank renewed its tough talk on bitcoin Friday, calling all digital currency activities illegal and vowing to crack down on the market.
In a Q&A posted to its website, the People’s Bank of China said services offering trading, order matching, token issuance and derivatives for virtual currencies are strictly prohibited. Overseas crypto exchanges providing services in mainland China are also illegal, the PBOC said.
“Overseas virtual currency exchanges that use the internet to offer services to domestic residents is also considered illegal financial activity,” the PBOC said, according to a CNBC translation of the comments. Workers of foreign crypto exchanges will be investigated, it added.
The PBOC said it has also improved its systems to step up monitoring of crypto-related transactions and root out speculative investing.
“Financial institutions and non-bank payment institutions cannot offer services to activities and operations related to virtual currencies,” the bank said, reiterating.
The price of bitcoin sank around 4% on a 24-hour basis, last trading at around $42,378, according to CoinMetrics. Ethereum, the second-largest digital asset, fell over 8% to $2,868.
It’s not the first time China has gotten tough on cryptocurrencies. Earlier this year, Beijing announced a crackdown on crypto mining, the energy-intensive process that verifies transactions and mints new units of currency. That led to a sharp slump in bitcoin’s processing power, as multiple miners took their equipment offline.
Crypto mining’s massive energy consumption is also part of the reason the industry is coming under scruntiny. In a separate statement, China’s economic planning agency said it’s an urgent task to root out crypto mining and the crackdown is important to meet carbon goals.
China is facing a severe power crisis that’s already roiled commodities from aluminum to steel, and several industries have seen their power supplies curbed in the last few weeks.
The country is home to a large concentration of the world’s crypto miners and as recently as April had a 46% share of the global hash rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption Index.
“The Chinese regulators have always been extreme in their views and these comments are not new,” said Vijay Ayyar, head of Asia Pacific with cryptocurrency exchange Luno in Singapore.
The Bottom Line
China’s renewed crackdown against crypto mining and trading activity started in May. That was the first time top officials had singled out crypto mining at the national level since dropping it in 2019 from a proposed list of dirty industries to be eliminated.
The move caused a collapse in crypto prices, with Bitcoin losing about half its value between April and July this year. While the market has since recovered some ground, it’s still far below the all-time high of $63,000.
Bitcoin, Ethereum, and smaller coins tumbled Friday after the People’s Bank of China and other regulators said all crypto-related transactions were illegal and must be banned. The statement, signed Sept. 15 by several government agencies, lays down a tough new regime, reinforcing a ban on mining, warning of stiff penalties for trading and financial transactions in crypto, and promising to “severely crack down on criminal activities involving virtual currencies.”