Bitcoin spirals as China declares crypto transactions illegal

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by Zachary Halaschak, Economics Reporter

China has declared all cryptocurrency transactions illegal, a move that comes amid an intensifying crackdown by the Chinese government.

The People’s Bank of China said on Friday that the move was done to ensure national security and stability, but the decision comes after several other regulatory changes in recent months that China hopes will cut down on its competition with the digital tokens.

Beijing said that online services offering trading for cryptocurrencies are now strictly banned, and overseas cryptocurrency exchanges are also outlawed. It also pledged to stamp out cryptocurrency mining across the country. The major step by the Chinese government caused initial panic in the markets and sent every major digital asset into a tailspin.

“The message was very, very strong today,” Naeem Aslam, chief market analyst at brokerage AvaTrade, told the Wall Street Journal. “They are really saying no one can have any association with cryptocurrencies.”

Bitcoin plunged more than 6% upon the news, dropping to about $41,000 as of about 9:15 a.m. EST. Ethereum shed nearly 9% of its value, dropping to below $2,800, and Ripple retreated by more than 8% on Friday morning.

The stock of companies that facilitate cryptocurrency transactions also fell because of China’s new edict. Shares of Robinhood were trading down 3%, and Coinbase’s stock declined by about 3.15%.

Sen. Pat Toomey, the chief Republican on the Banking Committee, blasted China’s “authoritarian crackdown” on cryptocurrencies and said that it is a major opportunity for the U.S. and “a reminder of our huge structural advantage over China.”

“Beijing is so hostile to economic freedom they cannot even tolerate their people participating in what is arguably the most exciting innovation in finance in decades. Economic liberty leads to faster growth, and ultimately, a higher standard of living for all,” the Pennsylvania lawmaker said on Twitter.

This is not the first time China has railed against cryptocurrencies. After reaching an all-time high of $63,000 in April, a series of regulatory moves by the Chinese government, including crackdowns on mining, depressed the price of Bitcoin and other cryptos.

To mine for bitcoin, high-powered computers are used to create rigs that verify virtual coin transactions, and many of those rigs are located in China . In May, Chinese Vice Premier Liu He called for  the “crackdown on bitcoin mining and trading behavior and resolutely prevent the transmission of individual risks to the social field.” China’s central bank also said it asked banks and payment institutions to crack down harder  on trading cryptocurrencies.

Source: Washington Examiner

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