China declares crypto transactions illegal, prohibits banks and fintechs from dealing

Ejike Kanife

The Central Bank of China has declared all crypto transactions in the country as illegal. This was revealed in an order issued on Friday. China’s apex bank has also banned banks, payment companies and fintechs operating in the country from transacting in cryptocurrency.

This latest crackdown is the latest in a series of onslaught by the highly conservative country against cryptocurrencies. The country also banned international crypto exchanges from providing their services to investors in the country effectively banning their operations in the country.

To ensure compliance, the central bank said that it will step up monitoring of risks from activities related to cryptocurrency. Bitcoin’s value has since dropped by as much as 4.5% as a result of the order while Ethereum slumped by 6.5%.

China’s onslaught against cryptos continues

This latest directive is China’s latest onslaught as it continues to crackdown on crypto mining and trading. In May, China’s State Council ordered a crackdown on crypto mining in the country. According to the council, mining activities consume huge amounts of energy which restricts its attempt to reduce carbon emissions.

mining farm, video cards and asiki mining farm.
Bitcoin mining farm
Image credit: Forbes

In June, Bitcoin miners in China’s southwest province of Sichuanare reportedly fled the country in droves following the ban on crypto mining. According to an operator of a crypto mining farm in the region, many miners are exiting the business to comply with government policies.

Being the region that accounts for over half of global bitcoin production, the Chinese ban on operations has basically paralyzed the industry as miners dump machines in despair or seek refuge in places such as Texas or Kazakhstan.

According to Global Times, local Chinese authorities claim the latest crackdown has cut the country’s bitcoin production by more than 90%.

China is the source of a majority of the world’s cryptocurrency trade. According to a 2020 study, the country accounts for nearly 80% of global bitcoin operations.

Because Bitcoin mining is an energy-intensive affair, China is an ideal location for it because of the availability of cheap electricity. However, most of China’s electricity comes from coal-powered stations. This is one of the dirtiest sources of power in a world struggling to switch to cleaner sources of energy.

This has caused a lot of dissatisfaction with Chinese authorities who are intent on achieving the country’s new climate goals. Tesla billionaire-owner, Elon Musk also came against the dirty energy source when he announced that his company won’t be accepting crypto payments until the process of mining is cleaned up.

With this latest development, China is effectively putting a nail in the coffin of crypto activity in the country.

Technext Newsletter

Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!

Register for Technext Coinference 2023, the Largest blockchain and DeFi Gathering in Africa.

Technext Newsletter

Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!