Crypto-related transactions will be considered illicit financial activity, including services provided by off-shore exchanges, the People’s Bank of China said on its website. It added that cryptocurrencies, including Bitcoin and Tether, are not fiat currency and cannot be circulated. China has long expressed displeasure with crypto because of its ties to fraud and money laundering, and excessive energy usage.
Bitcoin slumped in the wake of the announcement, falling 6% to about USD 41,800 as of 7:05 a.m. in New York. China’s strict approach is part of the reason why Bitcoin prices collapsed in May and have struggled to regain previous all-time highs above USD 60,000. While there are probably still Chinese onshore speculators, activity has already shifted out of the country over the years amid increasingly stringent regulations, says Clara Medalie, the research lead at data provider Kaiko.
China is home to a large concentration of the world’s crypto miners, who require massive amounts of power and thus run afoul of the nation’s efforts to curb greenhouse-gas emissions. The country is a dominant player in crypto and as recently as April 2021 had a 46% share of the global hash rate, a measure of computing power used in mining and processing, according to the Cambridge Bitcoin Electricity Consumption Index.
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