Bitcoin takes a hit as China declares all cryptocurrency transactions illegal.
SHANGHAI, China — On Friday, China intensified a crackdown on cryptocurrency trading, threatening to hunt out "illegal" behaviour and putting pressure on bitcoin and other major coins, as well as crypto and blockchain-related companies.
In a joint statement, ten Chinese government agencies, including the central bank, banking, securities, and foreign exchange authorities, said they will work closely to maintain a "high-pressure" clampdown on cryptocurrency trade.
The People's Bank of China (PBOC) has stated that cryptocurrencies should not be traded in the same way as traditional currencies, and that foreign exchanges should not provide services to mainland investors via the internet.
Financial institutions, payment businesses, and internet enterprises are also prohibited from aiding cryptocurrency trade, according to the PBOC.
The moves come after China's State Council, or cabinet, vowing in May to crack down on bitcoin mining and trade as part of efforts to combat financial risk, causing a massive sell-off of cryptocurrencies.
The PBOC said in a statement on its website that the Chinese government will "resolutely crack down on virtual currency speculation, and related financial activities and misbehaviour in order to preserve people's properties and maintain economic, financial, and social order."
Bitcoin, the world's most valuable cryptocurrency, fell more than 6% to $42,2167 in response to the new move, after falling less than 1% previously.
Smaller coins, which usually rise and fall in lockstep with bitcoin, have also fallen in value. Ether has lost 10% of its value, while XRP has lost a comparable amount.
"There's a sense of dread in the air," said Joseph Edwards, head of research at London-based bitcoin brokerage Enigma Securities. "Across the board, cryptocurrency continues to reside in a grey area of legality in China."
Cryptocurrency and blockchain-related stocks were also impacted by the decision.
Riot Blockchain, Marathon Digital, and Bit Digital, all of which are listed in the United States, are down 6.3 percent to 7.5 percent in premarket trade. SOS, a China-focused crypto exchange, sank 6.1 percent, while Coinbase Global, a San Francisco-based crypto exchange, dipped 3.4 percent.
The National Development and Reform Commission (NDRC) said that it would conduct a nationwide investigation into cryptocurrency mining. According to the report, such activities add little to China's economic growth, create dangers, consume a lot of energy, and obstruct carbon neutrality aspirations.
It is a "imperative" to wipe out cryptocurrency mining, a task key to promoting China's economy's high-quality growth, in a notification to local governments, the NDRC stated.
Before a crackdown that began earlier this year, virtual currency mining was a significant business in China, accounting for more than half of the world's crypto supply.
The NDRC stated that it will work closely with other government authorities to ensure that mining receives no financial assistance or electricity. Local governments were also advised by the national planning agency to develop a precise timeframe and road map to eliminate such activities.
Local government regulations had previously immobilised the mining sector, with miners abandoning their machines in despair or seeking sanctuary in locations like Texas or Kazakhstan.