The Chinese government is cracking down on Bitcoin and other cryptocurrencies. In a big step forward in its anti-crypto plans, which started in May, the People’s Bank of China has decided that crypto transactions are illegal and called for a formal ban of all Bitcoin and crypto-related transactions.
The People’s Bank of China says it’s concerned about national security and the safety of residents’ assets. Bloomberg reports that the country’s bank says that cryptocurrency isn’t a fiat currency, which means it isn’t a government-issued currency and is not backed by a commodity.
China is also looking to root out the mining of digital assets. Chinese officials are targeting crypto because of its possible ties to fraud, money laundering, and excessive energy usage. The country has a very concentration of the world’s crypto miners, which are using a considerable amount of energy. China is already facing a severe power crisis, and excessive mining isn’t helping.
As you might expect, the price of Bitcoin and other cryptocurrencies were harmed by the announcement, with Bitcoin falling about 8%, down to just over $41,000. It has since rebounded a little and is now selling for closer to $42,000, though. Etherium also dropped, and is now selling for around $2,800, a 7.6% decrease. Even Dogecoin fell by more than 6% after the news broke.
Whether it’ll have a long-term effect on the price remains to be seen, but some experts think it’ll just be temporary. “China’s ban on all cryptocurrency trading activity will have some short-term impact on the currency’s valuation, but long-term implications are likely to be muted,” said Ganesh Viswanath Natraj, an assistant professor of finance at Warwick Business School.