China Declares Bitcoin Transactions Illegal

China declares all cryptocurrency transactions illegal and the price of Bitcoin plummets. It is China's most severe crackdown on cryptography to date

As of today (24) all Bitcoin transactions are illegal in China and mining is banned throughout the country. This is what the People's Bank of China, the equivalent of the Central Bank in Brazil, declared as a way to meet the country's carbon targets, as cryptocurrency mining is responsible for a very large part of energy consumption, something which has affected the country a lot.

Transactions related to encryption will be considered illicit financial activities, including services provided by off-shore exchanges, the People's Bank of China said on its website. These prohibited cryptocurrencies include Bitcoin and Tether, which are not fiat currency and cannot be circulated in the country. Such an announcement, of course, affected the price of the currency.

Bitcoin tumbled after the announcement, dropping 8% to about $41.000 as of 9:XNUMX am in New York. Chinese authorities are going further to eliminate the encryption trade because of its links to fraud, money laundering and excessive energy use. China already has rules that prohibit banks from offering services related to encryption. To get around these rules, traders moved to over-the-counter platforms and offshore exchanges.

Bitcoin Transactions
Bitcoin price drop today (24)

“China's ban on all cryptocurrency trading activities will have some short-term impact on the currency's appreciation, but the longer-term implications will likely be muted,” said Ganesh Viswanath Natraj, assistant professor of finance at Warwick Business School. While there are likely still Chinese speculators ashore, activity has shifted out of the country over the years, said Clara Medalie, research leader at data provider Kaiko.

China Barra Bitcoin Transactions to Contain Energy Spending

Among the reasons for the change announced by the PBOC is the high energy consumption that is used in cryptocurrency mining. The massive energy consumption of crypto mining is also part of the reason the industry is being scrutinized. In a separate statement, China's economic planning agency said it was an urgent task to eradicate crypto mining and that crackdown was important to meeting carbon targets.

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China is facing a severe energy crisis that has already affected commodities, from aluminum to steel, and several industries have seen their energy supply cut in recent weeks. The country is home to a large concentration of the world's cryptominers and, as of April, had a 46% share of the global mining rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption Index.

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Attempt to contain carbon emissions is the official version

“Chinese regulators have always been radical in their views and these comments are nothing new,” said Vijay Ayyar, head of Asia-Pacific with the Luno cryptocurrency exchange in Singapore.

“The interesting thing is also why they keep making these statements. Probably because they feel that activity continues unabated in China and therefore having to be more radical in their actions.”

Now, the question remains about what will happen to the mining farms that will have an excess of hardware in their hands without being able to use it. Recently, as part of efforts to curb the high prices of hardware such as graphics cards and SSDs, companies have been cutting back on parts warranty times. These measures are forcing miners to sell their used parts at reduced prices.

Now, leave in the comments what did you think of the decision? Invest in bitcoins? Did you feel the thump of the fall? Contact us and also take the opportunity to read more News on our website.

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Source: WSJ

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Paulo Fabris is a journalist, writer, RPG player, gamer, cosplayer, nerd and fan of anime since the time of TV Manchete.