Bitcoin and other cryptocurrencies tumbled as China stepped up its crackdown on cryptocurrencies Friday.
“Virtual currency-related business activities are illegal financial activities” the People’s Bank of China (PBOC) announced. The central bank also vowed to put an end to all crypto mining in the country.
In Friday’s statement, the PBOC also issued yet another warning stating that cryptocurrencies put people’s assets in danger.
Crypto trading was banned in China in 2019, but it was still available to Chinese citizens online through foreign exchanges. Friday’s announcement means that China will close that loophole.
Despite the Chinese government’s hostility to cryptocurrencies, China is still one of the largest crypto markets. Following the announcement, Bitcoin dropped 8% to $41,000, before stabilizing at about $42,000.
Most analysts cite China’s digital currency Digital Yuan as the reason behind China’s crackdown. Chinese authorities don’t like competition, and they are not fond of anything they can’t control.
Another reason why Chinese authorities target crypto is its huge energy consumption. That’s why PBOC vowed to stamp out crypto mining that is still going on in hiding.
China began cracking down on crypto mining in May 2021, starting with mining operations in the Inner Mongolia region. The biggest crackdown came in June, causing miners to scramble to get their equipment out of the country and sending Bitcoin below $30,000. The price of Bitcoin at the time fell below half of its all-time high of $63,000.
The latest move is not likely to have such a dramatic impact. Most crypto trading was already moved offshore in China, out of the reach of Chinese regulators.
Some see this move as an opportunity for the U.S. to reinstate its leadership in the crypto space. Senator Pat Toomey stated that the crackdown reveals the “structural advantages” of the U.S. over authoritarian China.