China’s most powerful regulators on Friday intensified the country’s crackdown on cryptocurrencies with a blanket ban on all crypto transactions and mining, hitting bitcoin and other major coins and pressuring crypto and blockchain-related stocks, Reuters reported.
Ten agencies, including the central bank, financial, securities and foreign exchange regulators, vowed to work together to root out “illegal” cryptocurrency activity, the first time the Beijing-based agencies have joined forces to explicitly ban all cryptocurrency-related activity.
China in May banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and issued similar bans in 2013 and 2017.
The repeated prohibitions highlight the challenge of closing loopholes and identifying bitcoin-related transactions, though banks and payment firms say they will support the efforts.
Friday’s statement is the most detailed and expansive yet from the country’s main regulators, underscoring Beijing’s commitment to suffocating the Chinese crypto market.
“In the history of crypto market regulation in China, this is the most direct, most comprehensive regulatory framework involving the largest number of ministries,” said Winston Ma, NYU Law School adjunct professor.
The move comes amid a global cryptocurrency crackdown as governments from Asia to the United States fret that privately operated highly volatile digital currencies could undermine their control of the financial and monetary systems, increase systemic risk, promote financial crime and hurt investors.
They also worry that mining, the energy-intensive computing process through which bitcoin and other tokens are created, is hurting global environmental goals.
Chinese government agencies have repeatedly raised concerns that cryptocurrency speculation could disrupt the country’s economic and financial order, one of Beijing’s top priorities.
Analysts say China also sees cryptocurrencies as a threat to its sovereign digital-yuan, which is at an advanced pilot stage.
This time the point was made very clear that China will not support cryptocurrency market development as it goes against its policies of tightening up control over capital, said George Zarya, CEO of Bequant crypto exchange in London.
The People’s Bank of China (PBOC) said cryptocurrencies must not circulate and that overseas exchanges are barred from providing services to mainland investors. It also barred financial institutions, payment companies and internet firms from facilitating cryptocurrency trading nationally.
The government will 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, the PBOC said.
Bitcoin, the world’s largest cryptocurrency, dropped more than 9 percent before paring those losses. It was down 6.6 percent at $41,937 around 12:00ET. Smaller coins, which typically mimic bitcoin, also tumbled.
China’s cabinet vowed in May to crack down on bitcoin mining and trading as part of a broader effort to mitigate financial risks, without going into details. That threat sent cryptocurrencies tumbling, with bitcoin alone slumping 30 percent in a day. Friday’s news dashed hopes among many in the industry that the May crackdown would be short-lived.
The move also hit cryptocurrency and blockchain-related shares, although they clawed back some of those declines in morning U.S. trading.
U.S.-listed miners Riot Blockchain, Marathon Digital and Bit Digital slipped between 2.5 percent and 5 percent, while San Francisco crypto exchange Coinbase Global fell just over 1 percent.
Despite the initial shock, some analysts said they did not expect the crackdown to dent global crypto-asset prices long term as companies globally continue to adopt crypto products and services.
The exposure of major crypto exchanges to China was not immediately clear, however. Binance, the world’s biggest, has been blocked in China since 2017, a spokesperson said. A spokesperson for Coinbase declined to comment.
The Chinese government has also struggled in the past to stop internet users from evading its controls. “China’s actions haven’t held back crypto’s rise too much in the past so I wouldn’t be surprised to see it bounce back once more,” wrote Craig Erlam, an analyst at currency broker OANDA.
Bitcoin and other cryptocurrencies are mined by high-powered computers competing to solve mathematical puzzles in an energy-intensive process that often relies on fossil fuels.
China’s National Development and Reform Commission said that it will work to cut off financial support and electricity supply for mining. Such activities contribute little to China’s economic growth, spawn risks and hamper carbon neutrality goals, it said.
Virtual currency mining had been a big business in China before May, accounting for more than half the world’s crypto supply, but miners have been moving overseas.
“The losers in all of this are plainly the Chinese. They will lose around $6 billion worth of annual mining revenue, all of which will flow to the remaining global mining regions,” said Christopher Bendiksen, head of research at digital asset manager CoinShares, citing Kazakhstan, Russia and the United States.