China bans all cryptocurrencies, declears it illegal

The People’s Bank of China declared all transactions involving virtual currencies illegal. They are currently working towards setting up a campaign to block the use of unofficial digital money, as it was brought to the notice of the public that Bitcoin, Etherum, and other digital currencies disrupt the financial system and are used in aiding money laundering and other crimes.

The Peoples Bank of China posted on its website that “Virtual currency derivative   transactions are all illegal financial activities and are strictly prohibited,”

Following the ban, the price of Bitcoin fell by more than 9 percent,  to  $41,085,  in the hours after the announcement,  as most other crypto tokens did. Ethereum slipped to almost 10 percent, falling from $3,100  to around $2,800.

Chinese banks were banned from handling cryptocurrencies in  2013,  but the government issued a reminder this year. This reminder reflected official concern for cryptocurrency mining and trading which might still be going on while indirectly exposing the state-run financial system to risks. Promoters of cryptocurrencies say they allow anonymity and flexibility,  but Chinese regulators worry they might weaken the ruling  Communist  Party’s control over the financial system and say they might help to conceal criminal activity.

In May, Chinese state intuitions warned buyers they would have no protection for continuing to trade Bitcoin and other currencies online, as government officials vowed to increase pressure on the industry.

In June, it told banks and payment platforms to stop facilitating transactions and issued bans on “mining” the currencies – the trade of using powerful computers to make new coins.

But Friday’s announcement is the clearest indication yet that China wants to shut down cryptocurrency trading in all its forms.

The statement makes clear that those who are involved in “illegal financial activities” are committing a crime and will be prosecuted and foreign websites providing such services to Chinese citizens online is also an illegal activity, it said.