China declares all cryptocurrency transactions illegal

China intensified its crackdown on crypto trading Friday. They pledged to eradicate ‘illegal’ activity, hitting Bitcoin and other major currencies, and urging crypto and blockchain-related stocks.

In a joint statement, ten Chinese government agencies, which include the central bank, as well as foreign exchange and securities regulators, stated that they would cooperate closely to keep a ‘high pressure’ clampdown on cryptocurrency trading.

According to the People’s Bank of China, cryptocurrencies cannot circulate on markets like traditional currencies. Additionally, overseas exchanges are prohibited from offering services to mainland investors via internet.

The PBOC also prohibited financial institutions, payment companies, and internet firms from facilitating cryptocurrency trades.

These moves follow a May vow by China’s State Council (or cabinet) to crack down bitcoin mining and trading in an effort to reduce financial risk. This led to a significant sell-off in cryptocurrencies.

According to the PBOC, the Chinese government will’resolutely clampdown on virtual currency speculation and related financial activities and misconduct in order to protect people’s property and maintain economic, social, and financial order.’

The latest move saw bitcoin, the largest cryptocurrency in the world, drop over 6 percent to $42,2167. It had previously been down around 1%.

Coins smaller than bitcoin also fell, as they tend to rise and fall with bitcoin. Ether dropped 10 percent, while XRP fell a similar percentage.

Joseph Edwards, Head of Research at Enigma Securities, London, said that there is a sense of panic. “Crypto is still legal in China in a gray area.”

This move also affected cryptocurrency and blockchain-related shares.

Premarket trading saw Bit Digital, Marathon Digital, and Riot Blockchain, U.S.-listed miners, slip between 6.3 percent to 7.5 percent China-focused SOS fell 6.1 percent, while San Francisco’s crypto exchange Coinbase Global dropped 3.4 percent.

According to the National Development and Reform Commission (NDRC), it is launching a nationwide clean-up of cryptocurrency mining. It stated that such activities do not contribute to China’s economic growth and are a source of risks. They also consume large amounts of energy and hinder carbon neutrality goals.

The NDRC stated in a notice to local authorities that it is an ‘imperative to eliminate cryptocurrency mining. This task is crucial to promoting high quality growth in China’s economy.

Before the crackdown began earlier this year in China, virtual currency mining was a huge business. It accounts for more than half the world’s crypto supply.

According to the NDRC, it will collaborate with other government agencies to ensure that financial support and electricity supply are not cut off for mining. The national planning body urged local governments for a timetable and road map to end such activities.

Local governments had previously placed restrictions that paralyzed the mining industry. Miners abandoned their machines in despair and sought refuge in Texas or Kazakhstan.