The People's Bank of China declared all cryptocurrency-related transactions illegal. The crypto market reacted with a fall. However, it was insignificant as the price of bitcoin fell by only 5%.
"Virtual currency-related business activities are illegal financial activities," the People's Bank of China said, warning it "seriously endangers the safety of people's assets".
This is not the first time that the Chinese financial authorities announce the need to ban crypto trading. According to Chinese regulators, cryptocurrencies are unstable and speculative investments, often used to launder illicit money. Cryptocurrency trading has been officially banned in China since 2019, but trading activities continue to go live online through trading platforms registered outside of mainland China.
This summer China banned the bitcoin mining. The ban led to the closure of large mining farms, a drop in the hashrate of the bitcoin network and its price. But by the fall, some of the Chinese miners relocated their production, and foreign production increased their capacity, which made it possible to restore the bitcoin hashrate. Following this, the bitcoin price also increased.
On the news about the ban of cryptocurrencies in China, the crypto market sank. But the drop caused by the statement of the Chinese regulator turned out to be insignificant. The BTC price fell by just over 5%.
Investors who have been working with cryptoassets for years noted that China is banning bitcoin annually since 2013. The current ban is “great news for bitcoin,” said Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management.
“The last thing we want is China [to be] involved in a currency of the world. The real issue is about control, and what governments don’t like is [that] bitcoin takes control of people’s monetary futures away from governments and [places it] in the hands of individuals."
Some speculate that China's ban on cryptocurrencies will allow the United States to occupy a vacant niche in the cryptoasset market. Senator Pat Toomey tweeted that the US will have significantly more opportunities to develop cryptocurrency infrastructure after China's new ban goes into effect.
“China’s authoritarian crackdown on crypto, including Bitcoin, is a big opportunity for the US. It’s also a reminder of our huge structural advantage over China.”