The PBOC believes that cryptocurrencies have contributed to spreading illegal activities such as money laundering. The monetary authority said that Ether and Bitcoin are not legal tenders, for which it prohibited their circulation as currencies.
Just seconds before China officially announced that it would ban cryptocurrencies, a Bitcoin miner managed to mine 1,366 bitcoins. The data reveals that another miner was able to withdraw USD 58 million worth of cryptocurrencies before the statement by Beijing.
The first miner took out 1,366 BTC before the announcement, having withdrawn 952 BTC the day before.
The Bank of China (PBOC) banned the use of cryptocurrencies within the country. They allege that the increase in the trading of cryptocurrencies is altering the economic and financial order.
The institution said that cryptocurrencies have also contributed to the growth of illegal and criminal activities. The PBOC believes that fraud, pyramid schemes, and money laundering put the security of people’s property at risk.
They said they would close cryptocurrency mines and would not allow new ones to open. Due in part to the low cost of electricity, China was one of the top countries in the world for such operations.
The Asian country monopolized in April 46% of the computational power to mine and process those assets, the Cambridge Bitcoin Electricity Consumption Index indicated.
In the past week, the value of Bitcoin and other cryptocurrencies fell rapidly due to fears that Chinese real estate firm Evergrande would go bankrupt. Many believe that could affect other companies in that sector inside and outside Asia.
Pressure on Bitcoin and Other Cryptocurrencies Increases
The announcement by the PBOC increases the pressure that China has been putting on cryptocurrencies since 2017. The ban is a measure in favor of the environment, as cryptocurrency mining requires consuming a lot of electricity, leading to carbon emissions. In addition, there is a fierce campaign to increase the state’s control over the economy and limit excessive risks in the financial system.
In 2017, the Chinese authorities had already closed national cryptocurrency exchange platforms. In 2019, the PBOC announced that it would block access to websites that advertised cryptocurrency offers.
Effects the Announcement Has Caused on Bitcoin
The monetary authority, the Central Administration of Cyberspace, and the Ministry of Public Security said that the cryptocurrency market was related to illegal activities. These include money laundering, illegal fundraising, fraud, and pyramid schemes, among others.
The PBOC specifically refers to Ether and Bitcoin as they are virtual currencies issued by non-monetary authorities. They say that they do not have the same status as legal tender, so they cannot circulate on the market as currencies.
The creation and trading of cryptocurrencies have been illegal activities in China since 2019. However, their new positioning has forced banks to curb such transactions. The fear that those assets cause them will lead them to close a large part of the Bitcoin network in the Asian country.
The statement by the PBOC has been the strongest signal from the Chinese government to stop the use of decentralized cryptocurrencies. In that sense, they continue developing the digital yuan, their central bank digital currency (CBDC) project.
By Alexander Salazar
