China extends Crypto ban; Bitcoin drops. China has outlawed all cryptocurrency transactions and has pledged to completely eliminate digital asset mining. Dealing the industry its most severe blow to date.
All cryptocurrency-related activities, including those supplied by offshore exchanges. Will be considered illegal financial activity, according to the People’s Bank of China. Which announced the move on its website. It went on to say that cryptocurrencies, such as Bitcoin and Tether. Are not fiat currencies and hence cannot be circulated in the traditional sense.
In the wake of the revelation, bitcoin fell by about 8% to roughly $41,000. As of 9 a.m. in New York, according to CoinDesk data.
Chinese authorities are taking more steps to eliminate cryptocurrency trading because of its links to fraud. Money laundering, and wasteful energy consumption. China already has regulations in place that prohibit banks from providing cryptocurrency-related services. Traders have turned to over-the-counter platforms and offshore exchanges in order to get past such regulations.
According to Ganesh Viswanath Natraj, assistant professor of finance at Warwick Business School. “China’s prohibition on any cryptocurrency trading activity will have some short-term influence on the currency’s worth. But long-term implications are likely to be subdued.”
Additionally, according to Clara Medalie, the research lead at data supplier Kaiko. While there are likely some Chinese onshore speculators. As China extends Crypto ban, the majority of their activity has already gone out of the nation over the years.
Another factor contributing to the industry’s unacceptably high energy consumption. Is the fact that it consumes so much electricity. The Chinese government’s economic planning bureau said in a separate statement. That eradicating crypto mining is a pressing priority. And that the crackdown is necessary to meet carbon reduction targets.
A serious power crisis in China has already roiled commodities
As a result of China’s chronic power shortage, which has already caused price volatility in commodities. Ranging from aluminum to steel. Some companies have had their power supply cut off in recent weeks.
According to the Cambridge Bitcoin Electricity Consumption Index. The country is home to a significant concentration of the world’s cryptocurrency miners. Who had a 46 percent share of the worldwide hash rate as recently as April. A measure of computer power utilized in mining and processing.
According to Vijay Ayyar, CEO of Asia Pacific at cryptocurrency exchange Luno in Singapore. “The Chinese regulators have always been radical in their views, and these comments are nothing new.”
“What’s fascinating is that they continue to make similar remarks for the same reason. It’s most likely because they believe China’s action would continue unabated. And as a result, they are forced to push into overdrive,” he concluded.
China’s intensified crackdown on cryptocurrency mining and trading activity began in May, and has continued to this day. Since crypto mining removed from a proposed list of filthy industries to phased out in 2019. It had been the first time that top officials have singled out cryptocurrency mining at the national level.
The move resulted in a precipitous drop in cryptocurrency values. With Bitcoin losing over half its value between April and July of this year. While the market has gained some ground since then. It still much below the all-time high of $63,000 reached in 2008.