China Just Made All Cryptocurrency Transactions Illegal

Arguing that digital-backed assets are a threat to society.
Brad Bergan
Various digital currency coins.jpgfactory / iStock

The Middle Kingdom is cracking down on crypto (again).

China's central bank has declared all cryptocurrency-backed transactions illegal within its borders, arguing for the ban of digital currency amid national concerns about the country's borders and "safety of people's assets," according to an initial report from Tech Crunch.

The most populated nation on Earth also banned foreign exchanges from providing services to users within its borders.

China says crypto trading is a threat to 'the social order'

Ten China-based agencies have pledged in a joint statement to collaborate a "high pressure" crackdown on the trade of cryptocurrencies in the country, according to the report. The People's Bank of China also ordered financial, internet, and payment firms to stop assisting or enabling cryptocurrency trading on their platforms, and argued that digital currencies like Tether and Bitcoin can't be circulated in markets because they're not fiat. According to the bank, digital currencies have disrupted "economic and financial order," and greased the wheels of "money laundering, illegal fund-raising, fraud, pyramid schemes, and other illegal and criminal activities."

Anyone who transgresses this new norm, warned the central bank of China, will face investigation "for criminal liability in accordance with the law." Additionally, the government of China will "resolutely clamp down on virtual currency speculation, and related financial activities and misbehavior in order to safeguard people's properties and maintain economic, financial and social order," added the bank, in the statement. This drastic move has already brought panic to some crypto traders, with bitcoin and several other currencies seeing a sharp drop in prices. Bitcoin fell at least 5.5% during Friday, at 4.62% down at the time of publishing this article.

The US could see a mass influx of bitcoin mining operations

China has served as home to some of the largest crypto mining services in the world, but many of those businesses will now fall into the crosshairs of the new policies. And this isn't the first time China has launched a major campaign against cryptocurrency and bitcoin-adjacent activities. But this could be the first time many if not all government agencies pool their resources in a collaborative effort to halt all trading of digital crypto assets. And, when it comes to NFTs, it's hard to completely deny sympathy with China's frustrations. But in the U.S., NFTs, and specifically bitcoin mining, In June, amid high crypto prices and exchange and a newly-adopted and blockchain-backed NFT market, bitcoin mining operations had noticeably soared. This had become such a powerful trend that significant bitcoin mining operations were buying up former industrial plants and factories, to serve as cheap space for crypto mining operations.

"We've produced enough machines now" to meet the mounting demand for crypto-mining facilities, said Foundry CEO Mike Colyer, in a Curbed report. Foundry offers consultation and equipment finance services for crypto miners who have enough devices to mine all the crypto they want, but "don't have anywhere to plug them in," Colyer said. One company, called Greenidge Generation, began a bitcoin mining operation in a defunct coal power plant near Seneca Lake in New York State. However, despite Greenidge's vehement denial, some residents later complained that substantial mining operations might harm the environment. While we can assume that crypto mining will also be banned under China and its bank's new norm, it would be a stretch to say that the Middle Kingdom is cracking down on cryptocurrencies out of ecological concerns. Time will tell how the crypto market ultimately responds, and perhaps overrides, the country's latest anti-crypto campaign.

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