Beijing is now banning all financial institutions, payment companies and internet platforms from allowing trading in crypto-currencies, be it Bitcoin, Ethereum and other digital currencies. Behind security and environmental justifications, China intends to eliminate any competition for its own digital currency, the e-yuan.
The Central Bank of China declared on Friday that all transactions related to cryptocurrencies are illegal. Beijing now bans all financial institutions, payment companies and internet platforms from allowing cryptocurrency trading. In addition, China’s central bank is looking to target foreign exchanges, explaining in its statement that “providing services through overseas virtual currency exchanges to Chinese residents through the Internet” is illegal.
Unsurprisingly, this decision has caused cryptocurrency prices to fall, with Bitcoin showing a 9% drop to below $42,000. The same punishment for Ethereum, whose value has lost 10% to fall below $ 2,800. Falls that have stabilized, and should not curb the appeal of digital currencies in the rest of the world.
The field open for the e-yuan, the Chinese digital currency
According to Beijing, cryptocurrency trading disrupts the “economic and financial order” by participating in illegal or criminal activities such as gambling, illegal fundraising, fraud, pyramid schemes and money laundering.
The ban also targets mining activity, which is considered environmentally dangerous because it creates risks and hinders carbon neutrality goals. As a result, China’s National Development and Reform Commission has said it will work to remove financial support and power supply for companies that promote mining.
Behind these environmental and security justifications, it is important to remember that China has its own digital currency, the e-yuan, and that its repressive measures will mainly eliminate competition.