China Declares All Cryptocurrency Transactions Illegal

China intensified its crackdown on cryptocurrency on Friday, calling all financial transactions involving cryptocurrencies illegal and issuing a nationwide ban on cryptocurrency mining.

In a joint statement by 11 Chinese government entities, authorities vowed to work closely to punish “illegal” crypto mining activities to help prevent the “hidden risks caused by the blind and disorderly development” of the industry and to help the country achieve its carbon reduction goals.

China’s central bank announced that services offering trading, order matching, token issuance and derivatives for virtual currencies would be strictly prohibited. The bank also said that overseas crypto exchanges providing services in mainland China were also illegal.

Less than three hours after the notice was posted by China’s central bank, Bitcoin, the world’s largest cryptocurrency, had dropped by about 7 percent, to around $41,100.

The clampdown comes as China’s central bank has been testing its own digital currency, the electronic Chinese yuan. The notice posted by the central bank explicitly called out Bitcoin and Ether for being issued by “non-monetary authorities,” suggesting that the electronic Chinese yuan, or eCNY, would not be affected by the latest announcements.

The moves on Friday were the latest signal of Beijing’s determination to turn the screws on cryptocurrencies, which it has long viewed as a threat to its control over capital flows in the country. China banned domestic cryptocurrency exchanges years ago, but statements in recent months from top policymakers and in state media have suggested the desire to further control financial risks.

In May, China’s State Council, or cabinet, vowed to crack down on bitcoin trading and mining, leading local authorities in several parts of China to shut down crypto mining operations. As recently as 2017, China made more than two-thirds of all Bitcoin issued daily.

The latest announcements also come amid a regulatory blitz that has seen Chinese authorities cracking down on the country’s booming tech, education and property sectors.

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